Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points lower than your current rate? Maybe that was good advice a number of years ago, but as refinance costs have been falling recently, it may be a good time to take a serious look. Refinancing has a variety of benefits that can make it worth the initial expenditure a few times over.
You might be able to lower your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage loan. Additionally, you may be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage loan, enabling you to add to your equity faster.
Fees and Expenses
All these benefits do cost something, though. With your refinance, you are paying for basically the same things you were charged for during your existing mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the refinanced mortgage can be significant. You might be told that points may be tax deductible, but as tax regulations are difficult to keep up with, we urge you to speak with a tax professional before depending on this.
Another thing about taxes is that when you bring down your interest rate, of course you will also be reducing the paid interest amount that you can deduct on your taxes. This is one more cost that some borrowers take into consideration. Call us at (909) 467-1090 to help you do the math.
Most people find that the savings per month quickly balance out the up-front expenses of refinancing. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your money on hand. Call us at (909) 467-1090 to get started.