Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate is at least two points under your current one? That could have been valid years ago, but with the fact that refinancing has been costing less recently, it's never the wrong time to think about a new mortgage loan! Refinancing your mortgage loan has a variety of benefits that often make it worth the initial expenditure many times over.
Advantages of Refinancing
When you refinance, you might be able to reduce your interest rate and monthly payment , sometimes significantly. You could also have the option to "cash out" a portion of your equity, that you may use to take care of higher interest debt, add on to your home, or finance a vacation. You might have the option to refinance into a shorter-term mortgage, enabling you to build up your equity quicker.
As you probably expect, you will have to pay for the the refinance process. You will have to pay the same kinds of expenses and fees as with your existing mortgage loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might consider paying points to receive a better interest rate. If you pay (on average) three percent of the mortgage loan amount initially, your savings for the term of the new mortgage can be significant. You might be told that points may be tax deductible, but as tax regulations are difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.
Speaking of taxes, when your interest rate is lowered, it follows that you will also be reducing the interest amount that you can deduct from your taxes. This is another cost that some borrowers consider. Call us at 701.222.0100 to help you do the math.
All things considered, for most borrowers the total of initial costs to refinance will be made up soon in monthly savings. We can help you figure out what your options are, 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 701.222.0100 to get started.
Want to know more about refinancing your home? Call us: 701.222.0100.