Is Refinancing Worth the Cost?

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Have you ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least 2 points under your present one? That may have been accurate years ago, but as refinancing has been costing less recently, it's never the wrong time to think about a new mortgage loan! A refinance can be worth its cost several times over, because of the advantages that can come, along with a lower interest rate.

Advantages of Refinancing

You might be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced loan. You also might be given the option of tapping into the equity in your home by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build your home equity more quickly by moving to a shorter term loan.

The Cost

Of course, you'll have some fees and expenses during your process of refinancing. You'll have the same types of expenses and fees as you did with your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to receive a lower interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, the savings for the term of the new mortgage loan can be substantial. Please talk to a tax professional before acting on rumors that these paid points may be deducted on your taxes.

Speaking of taxes, once you reduce your interest rate, it follows that you'll also be lowering the paid interest amount that you may deduct from your federal income taxes. This is one more expense that borrowers take into consideration. We can help you do the math! Call us at (512) 291-6100.

Most borrowers find that the monthly savings quickly outweigh the up-front cost of refinancing. We'll work with you to find out which loan program is ideal for you, looking at your cash on hand, the likelihood of selling your house in the near future, and how refinancing might effect your taxes. Call us at (512) 291-6100 to get started.

Curious about refinancing your home? Give us a call at (512) 291-6100.

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