When is Refinancing Worth it?
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Some have said that only in the case your new interest will be at least two points lower, should you refinance your mortgage. Maybe several years ago that was good advice, but since refinance costs have been falling recently, it could be time to take a serious look. Refinancing has various advantages that can make it worth the up-front cost a few times over.
Benefits
When you refinance, you may have the ability to lower your interest rate and monthly payment amount, sometimes by a lot. Additionally, you could have the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to build your home equity quicker.
The Cost
Of course, you'll have some fees and expenses during your the refinance process. With your refinance, you're paying for most of the same things you paid for during your original mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can result in a better interest rate. When you pay (on average) 3% of the loan amount initially, the savings for the life of the refinanced mortgage can be substantial. Please consult a tax professional before acting on hear-say that these paid points may be deducted on your taxes.
Speaking of taxes, when your interest rate is reduced, it follows that you'll also be lowering the interest amount that you can deduct on your federal income taxes. This is another cost that some borrowers take into account. Call us at to help you do the math.
All things considered, for most people the total of initial costs to refinance are paid back soon in savings each month. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at to get started.
Want to know more about refinancing your home? Give us a call at .