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 will be at least 2 points below your current one? Maybe that was good advice a number of years ago, but since refinance costs have been falling recently, it could be time to look into it. A refinanced mortgage loan is often worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate.

Benefits

You might be able to bring down your interest rate (sometimes substantially) and reduce your monthly payment amount with your refinanced mortgage loan. You could also have the ability to "cash out" some of the built-up equity in your home, which you may use to consolidate debt, improve your home, or finance a vacation. You might have the option to refinance to a shorter-term mortgage, giving you the ability to add to your home equity faster.

Fees and Expenses

Of course, you will have some fees and expenses during the process of refinancing. When you refinance, you are paying for a lot of the same things you paid for when you got your current mortgage loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You could offer to pay discount points (prepaid interest) to gain a better rate of interest. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the refinanced mortgage can be great. We recommend that you talk to a tax professional before acting on hear-say that these paid points can be deducted on your federal income taxes.

Another thing about taxes is that once your interest rate is reduced, naturally you will also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is one more expense that some borrowers take into consideration. We can help you do the math! Call us at (718) 639-9500.

Ultimately, for most the amount of initial costs to refinance will be made up soon in savings each month. We'll help you determine what program is best for you, looking at your cash on hand, how likely you are to sell your residence in the near future, and how refinancing will effect your taxes. Call us at (718) 639-9500 to get started.

Curious about refinancing your home? Give us a call at (718) 639-9500.

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