Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate is at least two points under your current one? Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it could be time to look into it. A refinance is often worth its cost several times over, factoring in the benefits that it brings, as well as a reduced interest rate.
You may be able to lower your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage loan. You also may have the option of tapping into the equity in your home by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You could have the option to refinance into a shorter-term mortgage, enabling you to build up your home equity faster.
All of these benefits do cost something, though. You'll be charged the same types of expenses and fees as you did with your present mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
Paying points can result in a better interest rate. Your savings on the life of the mortgage loan might be significant if you've paid up front about 3% of the new loan total. You may be told that points may be tax deductible, but since tax regulations can be difficult to keep up with, please speak with your tax professional before making any decisions based on this.
One more expense that borrowers might take into account is that a lower rate of interest will reduce the interest amount you will be able to deduct on your taxes. Call us at (860) 658-7100 to help you do the math.
All things considered, for most people the amount of up-front costs to refinance will be paid back very quickly in savings each month. We can help you find out your options, considering the effect a refinance might 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 at (860) 658-7100.