Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate is at least 2 points under your existing rate? That could have been valid years ago, but with refinancing dropping in cost recently, it's never the wrong time to think about a new mortgage loan! A refinance may be worth its cost many times over, because of the benefits that it brings, as well as a lower interest rate.

Advantages

When you refinance, you may have the ability to reduce your interest rate and monthly mortgage payment amount, sometimes by a lot. You also could be given the option of tapping into the equity in your house by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build your home equity more quickly by moving to a shorter-term mortgage loan.

Expenses and Fees

All of these benefits do cost something, though. With your refinance, you are paying for basically the same things you were charged for during your original mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying points can help you get a lower interest rate. If you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the new mortgage loan can be significant. Please consult a tax professional before acting on hear-say that the paid points may be deducted on your federal income taxes.

Speaking of taxes, once your interest rate is reduced, it follows that you'll also be lowering the paid interest amount that you will be able to deduct on your federal income taxes. This is another expense that borrowers take into consideration. Call us at 205-941-1484 to help you do the math.

All things considered, for most the amount of initial costs to refinance are paid back soon in monthly savings. We'll work with you to determine what mortgage program is perfect for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing can effect your taxes. Call us at 205-941-1484 to get you started.

Want to know more about refinancing? Give us a call: 205-941-1484.

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