Is Refinancing Worth the Cost?
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It has been said that only when your new interest will be at least two points below your current rate, should you refinance your loan. That might have been valid a while back, but with refinancing dropping in cost recently, it's never the wrong time to think about a new mortgage! A refinance may be worth its cost many times over, considering the advantages that it brings, in addition to a lower interest rate.
When you refinance, you may have the ability to lower your interest rate and monthly payment , perhaps significantly. Additionally, you might be given the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also get the chance to build up home equity more quickly by changing to a shorter-term loan.
All of these benefits do cost something, though. You will have to pay the same kinds of fees as you did with your present home loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying points can result in a better interest rate. If you pay (on average) three percent of the loan amount initially, the savings for the life of the refinanced loan can be significant. We recommend that you consult with a tax professional before acting on hear-say that the paid points may be deducted on your taxes.
Speaking of taxes, once you reduce your interest rate, it follows that you'll also be reducing the interest amount that you can deduct from your taxes. This is another expense that some borrowers take into consideration. Call us at (732) 969-9300 to help you do the math.
Ultimately, for most borrowers the total of initial costs to refinance will be paid back very quickly in monthly savings. We'll help you figure out which program is the ideal fit for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing may have on your taxes. Call us at (732) 969-9300 to get started.
Curious about refinancing your home? Call us: (732) 969-9300.