Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that states you should only refinance if the new interest rate is at least two points under your existing rate? Maybe 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 is often worth its cost many times over, considering the advantages that it brings, in addition to a reduced interest rate.

Benefits

You might be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced mortgage loan. You might also have the ability to "cash out" some of the built-up equity in your residence, which you will be able use to take care of higher interest debts, improve your home, or take a vacation. With reduced rates, you may also be able to build your home equity faster by switching to a shorter-term mortgage loan.

The Cost

Of course, you'll have to pay for your the refinance process. With your refinance, you're paying for basically the same things you paid for at the time you obtained your original mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying discount points can result in a better interest rate. When you pay (on average) three percent of the loan amount up front, the savings for the term of the new mortgage loan can be significant. Please talk to a tax professional before acting on hear-say that the points paid may be deducted on your taxes.

Speaking of taxes, if your interest rate is reduced, of course you'll also be lowering the interest amount that you can deduct from your taxes. This is another expense that some borrowers take into account. Call us at 703.255-5810 to help you do the math.

Most borrowers find that the monthly savings outweigh the up-front expenses of refinancing. We can help you find out what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 703.255-5810 to get you started.

Curious about refinancing? Give us a call: 703.255-5810.

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