Is Refinancing Worth the Cost?
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Ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least two points under your existing one? That could have been accurate years ago, but since refinancing has been costing less recently, it is a good time to consider a new loan! A refinance is often worth its cost several times over, because of the advantages that it brings, as well as a lower interest rate.
Benefits
When you refinance, you could be able to reduce the interest rate and monthly payment amount, sometimes by a lot. You may also be able to "cash out" some of your equity, which you are able use to take care of higher interest debt, make home improvements, or take a vacation. You might be able to refinance to a shorter-term mortgage loan, enabling you to add to your equity quicker.
Fees and Expenses
As you probably expect, you will have some fees and expenses during the the refinance process. You'll have to pay the same types of expenses and fees as you did with your existing home loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can help you attain a lower interest rate. Your savings over the life of the loan may be significant if you have paid up front about three percent of the new loan balance. You may have heard that these points may be tax deductible, but since tax regulations can be difficult to keep up with, please consult your tax professional before making any decisions based on this.
Speaking of taxes, if your interest rate is reduced, it follows that you'll also be lowering the interest amount that you can deduct on your federal income taxes. This is another cost that some borrowers take into account. Call us at (573) 302-9990 to help you do the math.
In the end, for most borrowers the total of up-front costs to refinance will be made up very quickly in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (573) 302-9990 to get you started.
Curious about refinancing? Give us a call at (573) 302-9990.