Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that says you should only refinance if your new interest rate is at least two points lower than your current one? Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it could be a good time to look into it. A refinanced loan is often worth its cost several times over, considering the benefits that may come, along with a lower interest rate.

Benefits from Refinancing

When you refinance, you could be able to reduce your interest rate and mortgage payment , sometimes by a lot. You may also be able to "cash out" some of your home equity, which you may use to take care of higher interest debts, add on to your home, or finance a vacation. With lower rates, you might also get the chance to build up home equity more quickly by switching to a shorter term mortgage loan.

The Cost

As you probably expect, you will have to pay for your the refinance process. With your refinance, you're paying for a lot of the same things you paid for at the time you obtained your original mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might look into paying points to reduce your interest rate. Your savings on the life of the mortgage could be significant if you have paid up front about three percent of the new loan total. You may be told that the points can be deducted on your income taxes, but since tax regulations are ever-changing, please speak with a tax professional before considering this in your calculations.

Another thing about taxes is that when you lower your interest rate, of course you will also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that some borrowers take into consideration. We can help you do the math! Call us at (260) 338-2561.

All things considered, for most people the total of up-front costs to refinance are paid back soon in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (260) 338-2561 to get started.

Curious about refinancing your home? Call us: (260) 338-2561.

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