Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate is at least 2 points lower than your existing one? That could have been true a while back, but since refinancing has been costing less over the last few years, it's a good time to think about a new loan! Refinancing has various advantages that can make it worth the initial expenditure several times over.
Advantages of Refinancing
When you refinance, you might be able to lower the interest rate and mortgage payment , perhaps by a lot. You could also be able to "cash out" some of your equity, that you are able use to take care of higher interest debt, add on to your home, or plan a vacation. With reduced rates, you may also be able to build your home equity more quickly by changing to a shorter term loan.
Fees and Expenses
As you probably know, you'll have to pay for your the refinance process. When you refinance, you're paying for most of the same things you were charged for at the time you got your existing mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might offer to pay discount points (prepaid interest) to gain a lower interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the life of the refinanced loan can be great. You may be told that points may be tax deductible, but as tax regulations can be difficult to keep up with, please speak with your tax professional before making decisions based on this.
An additional expense that borrowers might take into account is that a lower rate of interest will reduce the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at (808) 935-0678.
In the end, for most borrowers the amount of initial costs to refinance will be made up very quickly in savings each month. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at (808) 935-0678 to get you started.
Curious about refinancing? Call us: (808) 935-0678.