Is Refinancing Worth the Cost?
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It has been said that only if your new interest is at least two points below your current rate, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been falling recently, it may be time to take a serious look. A refinance can be worth its cost several times over, considering the advantages that it brings, as well as a lower interest rate.
You may be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced mortgage. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You could be able to refinance into a shorter-term mortgage program, giving you the ability to build your equity quicker.
Expenses and Fees
Of course, you will have to pay for your the refinance process. When you refinance, you're paying for a lot of the same things you paid for at the time you got your current mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can result in a better interest rate. When you pay (on average) 3% of the loan amount up front, your savings for the life of the new mortgage loan can be substantial. We recommend that you consult a tax professional before acting on rumors that any points paid may be deducted on your taxes.
Another expense that borrowers may take into account is that a reduced interest rate will reduce the interest amount you'll deduct from your federal income taxes. Call us at 312-829-1010 to help you do the math.
Ultimately, for most the amount of initial costs to refinance will be paid back soon in monthly savings. We will work with you to figure out which program is perfect for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and the effect refinancing could have on your taxes. Call us at 312-829-1010 to get started.