Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least 2 points under your present one? Perhaps that was good advice several years ago, but as refinance costs have been getting lower, it could be a good time to look into it. A refinance may be worth its cost several times over, considering the advantages that it brings, along with a reduced interest rate.

Benefits from Refinancing

When you refinance, you may be able to lower your interest rate and mortgage payment , sometimes considerably. You may also have the option to "cash out" a portion of your equity, that you will be able use to consolidate debts, add on to your home, or finance a vacation. You could be able to refinance to a shorter-term mortgage loan, enabling you to add to your home equity faster.

Expenses and Fees

Of course, you'll have to pay for your process of refinancing. When you refinance, you're paying for a lot of the same things you paid for during your original mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could need to pay discount points (prepaid interest) to attain a lower interest rate. The money you will save on the life of the mortgage loan may be substantial if you have paid up front about three percent of the new loan total. We recommend that you talk to a tax professional before acting on advice that any points paid may be deducted on your taxes.

Speaking of taxes, if you reduce your interest rate, of course you will also be lowering the paid interest amount that you may deduct on your taxes. This is another cost that some borrowers consider. Call us at 706-860-5514 to help you do the math.

Ultimately, for most borrowers the total of initial costs to refinance will be made up very quickly in savings each month. We can help you find out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 706-860-5514 to get started.

Want to know more about refinancing? Call us at 706-860-5514.

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