Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points below your current one? That could have been true a while back, but since refinancing has been costing less recently, it is never the wrong time to explore the options of a new loan! A refinance is often worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate.
Benefits
When you refinance, you might have the ability to reduce the interest rate and monthly payment amount, perhaps considerably. You could also be able to "cash out" a portion of the built-up equity in your home, which you can use to consolidate debts, improve your home, or take a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to build your equity quicker.
Fees and Expenses
All these benefits do come with some expense, though. You'll have to pay the same sort of fees as you did with your existing mortgage. These could include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might need to pay points (prepaid interest) to attain a more favorable interest rate. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the refinanced mortgage can be significant. Please talk to a tax professional before acting on hear-say that these points paid may be deducted on your taxes.
Another thing about taxes is that if your interest rate is lowered, naturally you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is one more cost that borrowers take into account. We can help you do the math! Call us at 303-471-4445.
Most people find that the monthly savings quickly outweigh the initial cost of refinancing. We can help you explore your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 303-471-4445 to get started.
Curious about refinancing? Give us a call at 303-471-4445.