Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest is at least two points under your current rate, should you refinance your loan. Maybe several years ago that was sage advice, but as refinance costs have been getting lower, it may be time to look into it. A refinance is often worth its cost many times over, because of the advantages that can come, along with a lower interest rate.
Advantages of Refinancing
When you refinance, you could be able to lower your interest rate and monthly payment , perhaps significantly. You also could have the option of tapping into the equity in your house by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also get the chance to build your home equity more quickly by moving to a shorter term mortgage loan.
Fees and Expenses
As you probably know, you will have to pay for your the refinance process. You'll be charged the same types of expenses and fees as you did with your present home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might offer to pay discount points (prepaid interest) to gain a lower interest rate. The amount you'll save over the life of the loan may be significant if you have paid up front about 3% of the new loan total. We recommend that you consult a tax professional before acting on rumors that any points paid can be deducted on your federal income taxes.
An additional cost that borrowers may consider is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. Call us at 603-893-6616 to help you do the math.
Most people find that the savings per month quickly balance out the up-front cost 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 may be to sell in the next couple of years, and your cash on hand. Call us at 603-893-6616 to get you started.
Want to know more about refinancing? Give us a call: 603-893-6616.