Is Refinancing Worth the Cost?

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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least two points below your current one? That might have been true years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to consider a new mortgage! Refinancing has a number of benefits that will often make it worth the initial expenditure a few times over.

Advantages

You may be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced mortgage. You also might have the option of pulling out some of the equity in your house by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With lower rates, you may also get the chance to build up home equity more quickly by moving to a shorter term mortgage.

Fees and Expenses

As you probably know, you will have some fees and expenses during the process of refinancing. With your refinance, you are paying for basically the same things you were charged for when you obtained your original mortgage. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Doing the Math

Paying points can help you get a better interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the refinanced mortgage can be significant. You may be told that points can be tax deductible, but as tax regulations can be ever-changing, we urge you to consult your tax professional before depending on this.

One more expense that borrowers might consider is that a reduced interest rate will lower the interest amount you will deduct on your taxes. We can help you do the math! Call us at 205-941-1484.

Most people find that the savings each month outweigh the initial expenses of refinancing. We can help you find out your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at 205-941-1484 to get you started.

Want to know more about refinancing your home? Call us: 205-941-1484.

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