When is Refinancing Worth it?
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Some have said that only if your new interest will be at least two points under your current rate, should you refinance your mortgage. Perhaps that was good advice a number of years ago, but as refinance costs have been getting lower, it could be time to look into it. A refinanced loan is often worth its cost many times over, considering the advantages that can come, in addition to a lower interest rate.
When you refinance, you could have the ability to reduce the interest rate and monthly mortgage payment amount, perhaps significantly. You may also have the option 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 plan a vacation. With lower rates, you might also be able to build up home equity more quickly by changing to a shorter-term mortgage loan.
Expenses and Fees
All of these advantages do cost something, though. You'll be charged the same kinds of expenses and fees as with your present mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might offer to pay discount points (prepaid interest) to get a better rate of interest. The money you will save over the life of the mortgage loan could be substantial if you've paid up front about 3% of the new loan balance. You may have heard that the points may be tax deductible, but as tax regulations are ever-changing, we urge you to speak with your tax professional before depending on this.
One more cost that borrowers might consider is that a lower rate of interest will reduce the interest amount you'll deduct on your federal income taxes. Call us at (816) 525-8000 & (81 to help you do the math.
In the end, for most people the total of initial costs to refinance will be made up very quickly in monthly savings. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (816) 525-8000 & (81 to get you started.
Want to know more about refinancing your home? Give us a call: (816) 525-8000 & (81.