Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate is at least two points under your present one? That may have been true a while back, but with the fact that refinancing has been costing less in recent years, it's never the wrong time to consider a new loan! Refinancing your mortgage has a number of advantages that will often make it worth the initial cost several times over.
Advantages of Refinancing
When you refinance, you could be able to lower your interest rate and monthly mortgage payment , perhaps considerably. You may also have the option to "cash out" some of the built-up equity in your home, which you may use to consolidate debt, make home improvements, or plan a vacation. With lower rates, you may also get the chance to build your home equity more quickly by moving to a shorter-term mortgage loan.
All these benefits do come with some expense, though. With your refinance, you are paying for a lot of the same things you paid for when you got your existing mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might offer to pay discount points (prepaid interest) to get a better interest rate. If you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the new mortgage can be significant. We recommend that you talk to a tax professional before acting on hear-say that the paid points may be deducted on your federal income taxes.
Another expense that borrowers may consider is that a reduced rate of interest will reduce the interest amount you will deduct on your federal income taxes. Call us at 248-644-1200 to help you do the math.
Most people find that the savings each month outweigh the up-front cost of a refinance. We'll work with you to determine which mortgage program is the right fit for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing could have on your taxes. Call us at 248-644-1200 to get started.
Curious about refinancing your home? Give us a call: 248-644-1200.
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Looking to refinance your home? Fill out the following form to get a fast quote from us.