When is Refinancing Worth it?
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It has been said that only when your new interest will be at least two points lower, should you refinance your loan. Perhaps that was good advice several years ago, but since refinance costs have been falling recently, it may be a good time to take a serious look. A refinance is often worth its cost several times over, factoring in the advantages that it brings, along with a lower interest rate.
You might be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You may also have the ability to "cash out" some of your equity, which you will be able use to consolidate debts, make home improvements, or finance a vacation. With lower interest rates, you may also get the chance to build your home equity more quickly by switching to a shorter term mortgage loan.
Expenses and Fees
All of these advantages do come with some expense, though. When you refinance, you're paying for many of the same things you paid for during your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You might offer to pay discount points (prepaid interest) to gain a more favorable rate of interest. When you pay (on average) three percent of the loan amount at the start, the savings for the life of the refinanced mortgage loan can be great. You might be told that the points may be tax deductible, but because tax regulations are ever-changing, we urge you to speak with a tax professional before making decisions based on this.
One more expense that a borrower might consider is that a reduced rate of interest will reduce the interest amount you will be able to deduct on your taxes. We can help you do the math! Call us at 214-865-7442.
All things considered, for most people the total of up-front costs to refinance will be paid back soon in monthly savings. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 214-865-7442 to get you started.
Curious about refinancing your home? Call us at 214-865-7442.