Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that states you should only refinance if your new interest rate is at least two points lower than your existing rate? Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it may be time to take a serious look. Refinancing your mortgage loan has a variety of benefits that can make it worth the up-front cost several times over.

Benefits from Refinancing

When you refinance, you might be able to lower your interest rate and monthly payment amount, perhaps significantly. Additionally, you may be given the option of pulling out some of the equity in your property by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build your home equity faster by changing to a shorter term mortgage loan.

The Cost

All these advantages do cost something, though. You'll have the same kinds of fees as you did with your existing mortgage. These could include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Do the Math

You might investigate paying points to be given a reduced interest rate. The amount you'll save over the life of the loan might be substantial if you've paid up front about three percent of the new loan total. Please talk to a tax professional before acting on hear-say that the paid points can be deducted on your taxes.

One more expense that borrowers might consider is that a reduced interest rate will reduce the interest amount you'll deduct on your taxes. Call us at (610) 889-7467 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the up-front cost of refinancing. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (610) 889-7467 to get you started.

Curious about refinancing? Call us at (610) 889-7467.

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