Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that states you should only refinance if the new interest rate will be at least two points lower than your existing one? Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it could be time to look into it. A refinanced mortgage loan can be worth its cost several times over, because of the benefits that it brings, in addition to a lower interest rate.
You could be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage. You also could be given the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to build up your home equity faster.
Of course, you'll have to pay for your the refinance process. You will have the same types of expenses and fees as with your current home loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might investigate paying points to be given a better interest rate. The amount you will save over the life of the mortgage loan may be substantial if you've paid up front about three percent of the new loan balance. You might be told that the points may be deducted on your income taxes, but as tax regulations can be ever-changing, we urge you to consult a tax professional before making any decisions based on this.
One more expense that borrowers might take into account is that a lower interest rate will reduce the interest amount you will be able to deduct from your taxes. Call us at (512) 291-6100 to help you do the math.
Most people find that the monthly savings quickly balance out the initial cost of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (512) 291-6100 to get started.
Curious about refinancing? Call us at (512) 291-6100.