Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that states you should only refinance if your new interest rate is at least 2 points under your existing rate? Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinance is often worth its cost many times over, considering the benefits that come, as well as a reduced interest rate.

Advantages

You could 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 also could be given the option of tapping into the equity in your property by "cashing out" some funds 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, enabling you to add to your home equity faster.

Expenses and Fees

As you probably expect, you'll have some fees and expenses during your the refinance process. You will be charged the same sort of fees as with your present mortgage. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

You might investigate paying points to be given a lower interest rate. If you pay (on average) three percent of the mortgage loan amount up front, your savings for the term of the new mortgage can be substantial. You may be told that points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please consult with a tax professional before making any decisions based on this.

Another thing about taxes is that if you lower your interest rate, of course you'll also be lowering the interest amount that you will be able to deduct on your federal income taxes. This is one more cost that some borrowers take into account. I can help you do the math! Call me at 612.816.1511.

Most borrowers find that the monthly savings quickly balance out the initial expenses of a refinance. We will work with you to figure out what mortgage loan program is perfect for you, considering your cash on hand, how likely you are to sell your residence in the near future, and the effect refinancing could have on your taxes. Call me at 612.816.1511 to get started.

Curious about refinancing? Give me a call at 612.816.1511.