When is Refinancing Worth it?
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Some have said that only if your new interest is at least 2 points under your current rate, should you refinance your loan. Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it may be time to take a serious look. Refinancing has some benefits that will often make it worth the initial expenditure a few times over.
You might be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced mortgage. You may also have the option to "cash out" some of the built-up equity in your residence, which you will be able use to take care of higher interest debt, improve your home, or plan a vacation. You could be able to refinance into a shorter-term mortgage program, enabling you to build up your equity quicker.
Fees and Expenses
As you probably know, you'll have some fees and expenses during the the refinance process. You will have the same types of fees as you did with your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying discount points can result in a better interest rate. When you pay (on average) 3% of the loan amount initially, your savings for the term of the new mortgage loan can be substantial. You might have heard that these points may be tax deductible, but as tax regulations are difficult to keep up with, please consult with your tax professional before depending on this.
Speaking of taxes, if your interest rate is lowered, it follows that you will also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that borrowers consider. Call us at (214) 448-4641 to help you do the math.
Most borrowers find that the monthly savings outweigh the up-front cost of refinancing. We will work with you to find out what loan program is ideal for you, considering your cash on hand, how likely you are to sell your residence in the near future, and what effect refinancing will probably have on your taxes. Call us at (214) 448-4641 to get you started.
Curious about refinancing your home? Give us a call: (214) 448-4641.