Is Refinancing Worth the Cost?
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Some have said that only when your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That might have been true years ago, but with refinancing dropping in cost recently, it's never the wrong time to think about a new mortgage! Refinancing your loan has a variety of benefits that often make it worth the up-front cost several times over.
You could be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced mortgage loan. Additionally, you might have 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 lower rates, you might also be able to build up home equity faster by switching to a shorter-term mortgage.
Fees and Expenses
All of these benefits do come with some expense, though. You will have the same sort of expenses and fees as you did with your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might need to pay discount points (prepaid interest) to attain a better rate of interest. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the refinanced mortgage loan can be substantial. Please consult with a tax professional before acting on advice that the points paid may be deducted on your taxes.
Another thing about taxes is that if you lower your interest rate, naturally you will also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is another expense that some borrowers take into account. Call us at (610) 889-7467 to help you do the math.
All things considered, for most borrowers the total of up-front costs to refinance are made up very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance could 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 you started.
Want to know more about refinancing? Give us a call at (610) 889-7467.