Is Refinancing Worth the Cost?
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Ever heard the old rule of thumb that says you should only refinance if your new interest rate is at least two points under your current rate? That may have been valid years ago, but with refinancing dropping in cost over the last few years, it's a good time to consider a new loan! Refinancing your loan has various advantages that will often make it worth the initial expenditure several times over.
Benefits from Refinancing
When you refinance, you may be able to lower the interest rate and mortgage payment amount, sometimes by a lot. You might also have the ability to "cash out" a portion of your home equity, which you can use to consolidate debt, make home improvements, or take a vacation. With reduced rates, you might also get the chance to build your home equity faster by switching to a shorter term loan.
Expenses and Fees
As you probably expect, you'll have some fees and expenses during your the refinance process. With your refinance, you're paying for a lot of the same things you were charged for during your existing mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying discount points can help you attain a lower interest rate. When you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the refinanced loan can be substantial. We recommend that you talk to a tax professional before acting on rumors that any paid points may be deducted on your taxes.
One more expense that a borrower may consider is that a lower interest rate will reduce the interest amount you will deduct from your federal income taxes. Call us at 713-370-LOAN(5626) to help you do the math.
Most borrowers find that the monthly savings balance out the up-front expenses of a refinance. We can help you figure out your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your money on hand. Call us at 713-370-LOAN(5626) to get started.