When is Refinancing Worth it?

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Some have said that only if your new interest will be at least two points lower, should you refinance your loan. Perhaps that was sound advice several years ago, but since refinance costs have been falling recently, it could be time to look into it. Refinancing has some advantages that can make it worth the initial cost many times over.


When you refinance, you could have the ability to lower your interest rate and monthly payment amount, sometimes significantly. You might also have the option to "cash out" a portion of your home equity, that you may use to consolidate debt, add on to your home, or plan a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by changing to a shorter term mortgage loan.

Fees and Expenses

As you probably expect, you'll have some fees and expenses during your process of refinancing. When you refinance, you're paying for basically the same things you paid for when you obtained your current mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might think about paying points to reduce your interest rate. Your savings on the life of the mortgage may be substantial if you've paid up front about three percent of the new loan total. You might hear that these points may be deducted on your income taxes, but since tax regulations can be ever-changing, please speak with a tax professional before considering this in your calculations.

Speaking of taxes, when you lower your interest rate, of course you will also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is another cost that some borrowers consider. We can help you do the math! Call us at 8165258000.

All things considered, for most the amount of up-front costs to refinance will be made up very quickly in savings each month. We'll help you determine what loan program is perfect for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing will have on your taxes. Call us at 8165258000 to get started.

Want to know more about refinancing? Call us: 8165258000.

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