When is Refinancing Worth it?
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Have you ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points under your current rate? That could have been valid a while back, but as refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! Refinancing has a number of benefits that often make it worth the up-front expenditure several times over.
Benefits from Refinancing
When you refinance, you could be able to lower the interest rate and monthly mortgage payment , perhaps by a lot. You may also have the option to "cash out" some of your home equity, that you will be able use to consolidate debts, add on to your home, or plan a vacation. You may be able to refinance to a shorter-term mortgage program, enabling you to add to your home equity faster.
Fees and Expenses
All of these advantages do come with some expense, though. When you refinance, you're paying for basically the same things you paid for during your existing mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could offer to pay points (prepaid interest) to get a better interest rate. Your savings over the life of the mortgage may be substantial if you have paid up front about three percent of the new loan balance. You might be told that these points can be deducted on your income taxes, but because tax regulations can be ever-changing, please consult your tax professional before making decisions based on this.
An additional cost that a borrower might take into account is that a reduced interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at 504-866-5626 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance are paid back very quickly in savings each month. We will work with you to find out what loan program is best for you, looking at your cash on hand, how likely you are to sell your home in the near future, and how refinancing may effect your taxes. Call us at 504-866-5626 to get started.
Want to know more about refinancing? Call us: 504-866-5626.
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