Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points lower than your current one? Perhaps that was good advice a number of years ago, but since refinance costs have been falling recently, it could be a good time to look into it. Refinancing your mortgage loan has some advantages that will often make it worth the up-front expenditure many times over.

Advantages

You might be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with a refinanced mortgage. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to build your equity quicker.

The Cost

As you probably expect, you'll have some fees and expenses during your the refinance process. When you refinance, you are paying for a lot of the same things you paid for during your existing mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying points can result in a lower interest rate. The amount you'll save over the life of the mortgage may be significant if you have paid up front about 3% of the new loan balance. Please consult a tax professional before acting on hear-say that the paid points can be deducted on your taxes.

Speaking of taxes, once your interest rate is reduced, of course you will also be reducing the interest amount that you can deduct from your federal income taxes. This is one more cost that some borrowers take into consideration. We can help you do the math! Call us at 504-866-5626.

All things considered, for most the total of up-front costs to refinance are paid back soon in savings each month. We'll help you figure out which loan program is the best fit for you, considering your cash on hand, the likelihood of selling your residence in the near future, and how refinancing might effect your taxes. Call us at 504-866-5626 to get started.

Want to know more about refinancing your home? Call us at 504-866-5626.

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