Is Refinancing Worth the Cost?
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Some have said that only when your new interest is at least two points under your current rate, should you refinance your mortgage. Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it may be a good time to take a serious look. A refinanced mortgage loan is often worth its cost several times over, because of the benefits that it brings, in addition to a reduced interest rate.
You could be able to lower your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced mortgage. You also might be given the option of pulling out some of your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You might have the option to refinance into a shorter-term mortgage, giving you the ability to build your home equity faster.
Expenses and Fees
All of these advantages do come with some expense, though. You'll pay the same sort of expenses and fees as you did with your present mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might offer to pay points (prepaid interest) to gain a lower rate of interest. The amount you'll save on the life of the mortgage loan may be substantial if you've paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on rumors that the paid points can be deducted on your federal income taxes.
Another expense that a borrower might take into account is that a reduced rate of interest will lower the interest amount you will be able to deduct from your federal income taxes. Call us at (860) 658-7100 to help you do the math.
Most people find that the savings each month quickly outweigh the initial expenses of refinancing. We can help you find out your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at (860) 658-7100 to get you started.
Curious about refinancing? Call us: (860) 658-7100.