Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest is at least 2 points below your current rate, should you refinance your mortgage. That might have been valid years ago, but since refinancing has been costing less recently, it's a good time to think about a new mortgage loan! Refinancing your mortgage has some advantages that will often make it worth the initial expenditure several times over.
When you refinance, you might be able to reduce your interest rate and monthly mortgage payment , perhaps significantly. Additionally, you may be given the option of pulling out some of the equity in your house by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also get the chance to build your home equity more quickly by moving to a shorter term mortgage loan.
Fees and Expenses
All these benefits do cost something, though. When you refinance, you're paying for many of the same things you paid for during your existing mortgage. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might offer to pay discount points (prepaid interest) to attain a more favorable rate of interest. If you pay (on average) 3% of the loan amount up front, your savings for the term of the new mortgage can be substantial. We recommend that you consult with a tax professional before acting on rumors that these points paid may be deducted on your federal income taxes.
Speaking of taxes, when your interest rate is lowered, of course you'll also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at 205-941-1484.
Ultimately, for most the amount of initial costs to refinance will be paid back soon in monthly savings. We will help you find out which mortgage loan program is best for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and what effect refinancing could have on your taxes. Call us at 205-941-1484 to get started.
Curious about refinancing your home? Give us a call: 205-941-1484.