Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points under your present one? Perhaps that was good advice a number of years ago, but as refinance costs have been getting lower, it could be time to take a serious look. Refinancing has a variety of benefits that can make it worth the up-front cost several times over.
Advantages of Refinancing
You might be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with a refinanced mortgage loan. You also may be given the option of tapping into the equity in your home by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build your home equity more quickly by moving to a shorter term mortgage loan.
Fees and Expenses
Of course, you will have some fees and expenses during your process of refinancing. You'll have the same sort of expenses and fees as with your existing home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can get you a lower interest rate. The money you will save over the life of the mortgage loan may be substantial if you've paid up front about three percent of the new loan balance. You may have heard that points can be tax deductible, but because tax regulations can be difficult to keep up with, we urge you to consult with your tax professional before depending on this.
One more expense that borrowers may take into account is that a lower rate of interest will lower the interest amount you'll deduct from your federal income taxes. Call us at 504-866-5626 to help you do the math.
All things considered, for most people the amount of initial costs to refinance will be made up very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 504-866-5626 to get you started.
Curious about refinancing? Give us a call at 504-866-5626.
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