Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least two points lower than your existing one? That could have been true a while back, but with refinancing dropping in cost in recent years, it is a good time to explore the options of a new mortgage! A refinanced loan is often worth its cost several times over, because of the advantages that can come, in addition to a reduced interest rate.

Advantages

You may be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with your refinanced loan. You also might be given the option of tapping into the equity in your house by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to build up your equity faster.

Expenses and Fees

All these benefits do come with some expense, though. You will be charged the same sort of fees as with your current mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Doing the Math

You might think about paying points to get a better interest rate. Your savings on the life of the mortgage loan may be significant if you've paid up front about three percent of the new loan balance. You may be told that points can be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to consult a tax professional before depending on this.

Speaking of taxes, if you lower your interest rate, naturally you will also be lowering the interest amount that you'll be able to deduct from your taxes. This is one more cost that borrowers take into account. Call us at 703.255-5810 to help you do the math.

Most borrowers find that the monthly savings balance out the up-front cost of a refinance. We'll help you determine what mortgage program is ideal for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing could effect your taxes. Call us at 703.255-5810 to get you started.

Want to know more about refinancing? Give us a call at 703.255-5810.

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