Is Refinancing Worth the Cost?

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It has been said that only in the case your new interest is at least 2 points below your current rate, should you refinance your mortgage. Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it could be time to look into it. Refinancing your loan has a number of benefits that can make it worth the up-front expenditure many times over.

Advantages

You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. Additionally, you could be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You could have the option to refinance into a shorter-term mortgage loan, enabling you to build up your home equity faster.

The Cost

As you probably know, you'll have some fees and expenses during the the refinance process. You'll have to pay the same types of expenses and fees as with your present mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could need to pay discount points (prepaid interest) to get a more favorable rate of interest. Your savings over the life of the mortgage loan might be substantial if you have paid up front about three percent of the new loan total. We recommend that you talk to a tax professional before acting on advice that any points paid may be deducted on your taxes.

Another thing about taxes is that once your interest rate is reduced, of course you'll also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is one more expense that some borrowers take into account. Call us at 972.798.2110 to help you do the math.

Most borrowers find that the savings per month balance out the initial expenses of refinancing. We'll help you find out which mortgage program is ideal for you, taking into account your cash on hand, how likely you are to sell your house in the near future, and how refinancing might effect your taxes. Call us at 972.798.2110 to get started.

Curious about refinancing your home? Give us a call at 972.798.2110.