Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points below your current rate? That might have been accurate years ago, but as refinancing has been costing less recently, it's never the wrong time to explore the options of a new mortgage! Refinancing has a variety of advantages that often make it worth the up-front expenditure several times over.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You might also have the option to "cash out" some of your home equity, which you are able use to take care of higher interest debts, add on to your home, or finance a vacation. You might have the option to refinance into a shorter-term mortgage program, enabling you to build your equity quicker.
As you probably know, you will have to pay for the the refinance process. You will have the same types of expenses and fees as with your current mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
You might need to pay points (prepaid interest) to get a better rate of interest. When you pay (on average) three percent of the loan amount up front, the savings for the term of the new loan can be great. We recommend that you consult with a tax professional before acting on rumors that any points paid can be deducted on your taxes.
Speaking of taxes, once you bring down your interest rate, naturally you'll also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is another cost that some borrowers consider. We can help you do the math! Call us at (773) 774-9040 Ext 121.
Ultimately, for most people the amount of initial costs to refinance will be made up very quickly in monthly savings. We can help you figure out 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 cash on hand. Call us at (773) 774-9040 Ext 121 to get you started.
Want to know more about refinancing your home? Give us a call at (773) 774-9040 Ext 121.