Is Refinancing Worth the Cost?
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Some have said that only if your new interest is at least 2 points under your current rate, should you refinance your loan. Perhaps that was good advice several years ago, but since refinance costs have been getting lower, it may be time to take a serious look. A refinanced loan may be worth its cost several times over, factoring in the benefits that it brings, as well as a lower interest rate.
When you refinance, you might have the ability to reduce your interest rate and monthly payment , perhaps by a lot. You might also have the ability to "cash out" some of your home equity, which you can use to take care of higher interest debt, add on to your home, or plan a vacation. With lower rates, you may also get the chance to build up home equity more quickly by changing to a shorter-term loan.
Fees and Expenses
All of these benefits do cost something, though. You will pay the same kinds of expenses and fees as with your existing mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can result in a better interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the term of the refinanced loan can be substantial. You might be told that these points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, please speak with your tax professional before making any decisions based on this.
One more expense that a borrower may consider is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. We can help you do the math! Call us at 516-431-2009.
In the end, for most borrowers the amount of up-front costs to refinance will be paid back soon in savings each month. We'll work with you to determine what program is perfect for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and the effect refinancing could have on your taxes. Call us at 516-431-2009 to get started.