Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least two points lower than your current one? Maybe several years ago that was wise advice, but as refinance costs have been falling recently, it could be time to take a serious look. A refinanced mortgage loan may be worth its cost several times over, because of the benefits that may come, along with a lower interest rate.
Benefits from Refinancing
You might be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced mortgage loan. You could also be able to "cash out" some of the built-up equity in your home, that you may use to take care of higher interest debt, improve your home, or take a vacation. With reduced rates, you might also be able to build up home equity faster by switching to a shorter term mortgage.
Expenses and Fees
All these benefits do cost something, though. When you refinance, you are paying for many of the same things you were charged for at the time you obtained your current mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Do the Math
You might investigate paying points to be given a better interest rate. When you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the new mortgage can be substantial. You may have heard that the points may be deducted on your income taxes, but as tax regulations can be ever-changing, please speak with your tax professional before making decisions based on this.
Another thing about taxes is that once your interest rate is lowered, naturally you will also be reducing the paid interest amount that you may deduct on your federal income taxes. This is one more expense that some borrowers consider. Call us at (718) 477-4405 to help you do the math.
Ultimately, for most people the total of initial costs to refinance will be made up soon in monthly savings. We can help you explore what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (718) 477-4405 to get you started.
Curious about refinancing? Give us a call: (718) 477-4405.