Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points below your existing rate? Perhaps that was good advice several years ago, but as refinance costs have been falling recently, it may be time to look into it. Refinancing your mortgage has a number of advantages that can make it worth the initial expenditure a few times over.

Advantages

You could be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage. You also might be given the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build up home equity faster by changing to a shorter term mortgage.

Fees and Expenses

As you probably know, you'll have some fees and expenses during your the refinance process. When you refinance, you're paying for basically the same things you were charged for at the time you got your existing mortgage. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might consider paying points to reduce your interest rate. The money you will save on the life of the loan might be significant if you've paid up front about three percent of the new loan total. You may be told that points may be deducted on your income taxes, but since tax regulations are difficult to keep up with, please consult with a tax professional before depending on this.

Another expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. Call us at (440) 234-9660 to help you do the math.

In the end, for most the amount of initial costs to refinance are made up very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at (440) 234-9660 to get started.

Want to know more about refinancing your home? Give us a call at (440) 234-9660.

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