When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that states you should only refinance if the new interest rate is at least two points below your present one? Maybe that was good advice a number of years ago, but as refinance costs have been falling recently, it could be time to take a serious look. Refinancing has some advantages that will often make it worth the initial cost many times over.

Advantages

You may be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced mortgage loan. You may also have the option to "cash out" some of your equity, that you may use to consolidate debt, add on to your home, or finance a vacation. With lower rates, you may also get the chance to build up home equity more quickly by changing to a shorter-term loan.

The Cost

All of these benefits do come with some expense, though. You'll have to pay the same kinds of expenses and fees as you did with your present home loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might investigate paying points to receive a reduced interest rate. Your savings over the life of the loan may be significant if you have paid up front about three percent of the new loan balance. You may hear that these points can be tax deductible, but since tax regulations are ever-changing, we urge you to consult your tax professional before depending on this.

One more expense that a borrower may consider is that a reduced rate of interest will reduce the interest amount you'll deduct on your federal income taxes. Call us at 678-992-0100 to help you do the math.

Most borrowers find that the savings each month quickly balance out the up-front expenses of a refinance. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your money on hand. Call us at 678-992-0100 to get you started.

Want to know more about refinancing? Call us: 678-992-0100.