Is Refinancing Worth the Cost?
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Some have said that only in the case your new interest will be at least two points lower, should you refinance your loan. Perhaps that was sound advice several years ago, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing has some advantages that often make it worth the initial cost several times over.
Advantages of Refinancing
When you refinance, you might have the ability to lower your interest rate and mortgage payment amount, perhaps significantly. Additionally, you may be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You may have the option to refinance to a shorter-term mortgage program, giving you the ability to build up your equity quicker.
Of course, you'll have some fees and expenses during your the refinance process. You'll have the same types of fees as with your existing mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying discount points can get you a lower interest rate. If you pay (on average) 3% of the loan amount up front, your savings for the life of the new mortgage can be substantial. You might have heard that these points can be tax deductible, but since tax regulations can be difficult to keep up with, please consult a tax professional before making decisions based on this.
Speaking of taxes, when you reduce your interest rate, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that borrowers take into account. Call us at (909) 467-1090 to help you do the math.
Ultimately, for most borrowers the total of up-front costs to refinance are paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (909) 467-1090 to get you started.