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 will be at least two points below your present one? Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it may be time to take a serious look. Refinancing your mortgage loan has various benefits that often make it worth the initial expenditure several times over.

Advantages

You could be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with a refinanced mortgage loan. Additionally, you may have the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage program, enabling you to build up your home equity faster.

The Cost

As you probably expect, you will have to pay for your process of refinancing. You'll pay the same sort of expenses and fees as you did with your present mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could need to pay points (prepaid interest) to gain a more favorable rate of interest. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the new mortgage can be significant. You might hear that the points may be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.

Another thing about taxes is that when your interest rate is lowered, of course you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is another cost that some borrowers consider. Call us at (407) 898-7559 to help you do the math.

Most borrowers find that the savings each month balance out the up-front expenses of a refinance. We will work with you to determine which mortgage loan program is right for you, considering your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing might have on your taxes. Call us at (407) 898-7559 to get you started.

Want to know more about refinancing? Give us a call: (407) 898-7559.

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