Is Refinancing Worth the Cost?
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Some have said that only if your new interest is at least 2 points lower, should you refinance your mortgage. Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing has a number of advantages that can make it worth the up-front expenditure a few times over.
When you refinance, you might have the ability to lower the interest rate and mortgage payment , sometimes by a lot. You also could have the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build your home equity more quickly by moving to a shorter term mortgage.
Fees and Expenses
All of these benefits do come with some expense, though. You'll pay the same types of fees as you did with your current home loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying discount points can get you a better interest rate. When you pay (on average) three percent of the loan amount at the start, the savings for the term of the refinanced loan can be significant. You might be told that these points can be tax deductible, but because tax regulations are difficult to keep up with, we urge you to consult with a tax professional before making decisions based on this.
Speaking of taxes, when you reduce your interest rate, of course you'll also be lowering the paid interest amount that you may deduct from your taxes. This is one more expense that some borrowers consider. We can help you do the math! Call us at 718-441-7000.
All things considered, for most the total of up-front costs to refinance are made up very quickly in savings each month. We'll work with you to determine which mortgage loan program is ideal for you, looking at your cash on hand, the likelihood of selling your house in the near future, and what effect refinancing might have on your taxes. Call us at 718-441-7000 to get started.
Curious about refinancing your home? Give us a call at 718-441-7000.