Is Refinancing Worth the Cost?

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Some have said that only if your new interest is at least two points under your current rate, should you refinance your mortgage. Maybe that was good advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing your loan has various benefits that can make it worth the up-front expenditure many times over.

Advantages of Refinancing

When you refinance, you might be able to reduce your interest rate and mortgage payment amount, sometimes significantly. You may also be able to "cash out" a portion of the built-up equity in your residence, that you are able use to consolidate debts, make home improvements, or finance a vacation. With reduced rates, you might also get the chance to build your home equity more quickly by moving to a shorter-term mortgage loan.

Expenses and Fees

As you probably know, you will have to pay for your process of refinancing. When you refinance, you're paying for basically the same things you paid for during your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can help you attain a better interest rate. Your savings over the life of the mortgage may be substantial if you've paid up front about three percent of the new loan total. You may have heard that points may be tax deductible, but as tax regulations can be ever-changing, please speak with a tax professional before making any decisions based on this.

Speaking of taxes, when your interest rate is reduced, of course you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that some borrowers take into account. We can help you do the math! Call us at (718) 477-4405.

All things considered, for most people the total of initial costs to refinance are paid back soon in monthly savings. We will help you determine what loan program is best for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and the effect refinancing could have on your taxes. Call us at (718) 477-4405 to get you started.

Curious about refinancing? Give us a call: (718) 477-4405.

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