Is Refinancing Worth the Cost?
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Some have said that only when your new interest is at least 2 points under your current rate, should you refinance your mortgage. That could have been true a while back, but as refinancing has been costing less over the last few years, it's a good time to consider a new mortgage! A refinanced mortgage loan may be worth its cost several times over, factoring in the benefits that may come, as well as a lower interest rate.
Benefits from Refinancing
When you refinance, you may be able to reduce your interest rate and mortgage payment amount, sometimes by a lot. You also might have the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you might also get the chance to build your home equity more quickly by moving to a shorter term mortgage loan.
Expenses and Fees
All these benefits do cost something, though. You will be charged the same kinds of fees as you did with your present mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Do the Math
Paying discount points can help you get a lower interest rate. If you pay (on average) 3% of the loan amount up front, your savings for the life of the refinanced mortgage can be substantial. We recommend that you consult a tax professional before acting on hear-say that the points paid may be deducted on your federal income taxes.
Another thing about taxes is that when your interest rate is lowered, naturally you will also be lowering the paid interest amount that you will be able to deduct from your federal income taxes. This is one more cost that borrowers consider. Call us at (610) 889-7467 to help you do the math.
Ultimately, for most borrowers the total of up-front costs to refinance are made up soon in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your cash on hand. Call us at (610) 889-7467 to get started.
Want to know more about refinancing? Call us at (610) 889-7467.