Is Refinancing Worth the Cost?
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Ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least two points lower than your existing one? Maybe that was sound advice several years ago, but since refinance costs have been falling recently, it could be time to look into it. Refinancing has a number of advantages that can make it worth the initial expenditure several times over.
Advantages of Refinancing
You might be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced mortgage loan. You might also be able to "cash out" some of your equity, that you may use to consolidate debt, add on to your home, or plan a vacation. You may be able to refinance to a shorter-term mortgage, giving you the ability to add to your home equity faster.
Fees and Expenses
As you probably know, you will have some fees and expenses during your the refinance process. You will pay the same kinds of expenses and fees as with your current mortgage loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might offer to pay points (prepaid interest) to attain a more favorable interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the new loan can be great. Please consult with a tax professional before acting on hear-say that these points paid may be deducted on your federal income taxes.
Another expense that borrowers might take into account is that a reduced rate of interest will lower the interest amount you will be able to deduct from your federal income taxes. Call us at (407) 294-4707 to help you do the math.
In the end, for most the amount of initial costs to refinance are paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at (407) 294-4707 to get you started.
Curious about refinancing your home? Call us at (407) 294-4707.