Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only refinance if your new interest rate is at least two points lower than your existing one? That may have been true a while back, but with refinancing dropping in cost recently, it is a good time to think about a new loan! A refinance can be worth its cost many times over, because of the advantages that come, as well as a lower interest rate.

Advantages of Refinancing

You might be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced loan. You might also have the ability to "cash out" a portion of your equity, which you can use to take care of higher interest debt, make home improvements, or plan a vacation. With lower rates, you may also be able to build up home equity more quickly by switching to a shorter-term mortgage.

The Cost

All these advantages do cost something, though. You will have the same types 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

You could offer to pay discount points (prepaid interest) to attain a better rate of interest. If you pay (on average) three percent of the loan amount initially, your savings for the life of the new loan can be significant. You might hear that the points may be deducted on your income taxes, but since tax regulations can be ever-changing, please speak with your tax professional before making any decisions based on this.

An additional cost that a borrower may consider is that a lower rate of interest will lower the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at 504-866-5626.

Most borrowers find that the monthly savings quickly balance out the up-front expenses of refinancing. We will work with you to figure out what loan program is best for you, taking into account your cash on hand, the likelihood of selling your home in the next few years, and how refinancing can effect your taxes. Call us at 504-866-5626 to get you started.

Curious about refinancing? Call us at 504-866-5626.

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