Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that states you should only refinance if the new interest rate is at least 2 points under your current one? That could have been true years ago, but as refinancing has been costing less recently, it is never the wrong time to explore the options of a new loan! Refinancing has some advantages that often make it worth the up-front expenditure several times over.

Advantages

You could be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage. You may also have the ability to "cash out" a portion of the built-up equity in your residence, that you may use to take care of higher interest debts, improve your home, or take a vacation. With reduced rates, you might also be able to build up home equity more quickly by switching to a shorter term mortgage.

The Cost

All these benefits do come with some expense, though. You will pay the same types of expenses and fees as you did with your present home loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Do the Math

You might look into paying points to receive a better interest rate. Your savings on the life of the mortgage may be significant if you've paid up front about 3% of the new loan balance. You might be told that points may be deducted on your income taxes, but as tax regulations can be ever-changing, please speak with a tax professional before considering this in your calculations.

An additional expense that borrowers might consider is that a lower rate of interest will reduce the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at 504-866-5626.

In the end, for most borrowers the amount of initial costs to refinance will be made up soon in monthly savings. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 504-866-5626 to get started.

Curious about refinancing your home? Call us: 504-866-5626.

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