Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least two points lower than your present rate? That may have been valid a while back, but with refinancing dropping in cost in recent years, it is never the wrong time to explore the options of a new loan! A refinance is often worth its cost many times over, considering the benefits that come, along with a reduced interest rate.

Benefits from Refinancing

When you refinance, you could be able to lower your interest rate and mortgage payment amount, sometimes considerably. You may also be able to "cash out" some of the built-up equity in your home, which you may use to consolidate debt, add on to your home, or finance a vacation. You may be able to refinance to a shorter-term mortgage, giving you the ability to build up your home equity faster.

Fees and Expenses

Of course, you'll have to pay for your the refinance process. With your refinance, you're paying for most of the same things you were charged for during your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount initially, the savings for the term of the refinanced mortgage can be significant. Please talk to a tax professional before acting on advice that the paid points can be deducted on your federal income taxes.

Speaking of taxes, when you reduce your interest rate, naturally you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more cost that some borrowers take into consideration. Call us at (303) 228-2254 to help you do the math.

In the end, for most the amount of initial costs to refinance will be paid back very quickly in monthly savings. We'll help you figure out which mortgage loan program is ideal for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and the effect refinancing might have on your taxes. Call us at (303) 228-2254 to get you started.

Want to know more about refinancing your home? Give us a call at (303) 228-2254.

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