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Is Refinancing Worth the Cost?

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It has been said that only in the case your new interest is at least two points lower, should you refinance your loan. That might have been true years ago, but with refinancing dropping in cost over the last few years, it's a good time to think about a new mortgage loan! A refinance is often worth its cost many times over, factoring in the benefits that can come, in addition to a lower interest rate.

Advantages of Refinancing

When you refinance, you could have the ability to lower your interest rate and mortgage payment amount, perhaps by a lot. You may also be able to "cash out" a portion of the built-up equity in your residence, which you will be able use to take care of higher interest debt, add on to your home, or take a vacation. With reduced interest rates, you might also be able to build your home equity faster by switching to a shorter term mortgage.

Fees and Expenses

As you probably expect, you'll have some fees and expenses during the process of refinancing. You'll have to pay the same sort of fees as you did with your current home loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might offer to pay points (prepaid interest) to attain a better interest rate. Your savings on the life of the loan might be substantial if you've paid up front about three percent of the new loan total. You may be told that these points may be deducted on your income taxes, but since tax regulations are ever-changing, we urge you to consult with a tax professional before making decisions based on this.

An additional expense that borrowers might take into account is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. Call us at (760)789-9995 to help you do the math.

Ultimately, for most the amount of up-front costs to refinance will be paid back very quickly in savings each month. We will help you find out what mortgage program is best for you, taking into account 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 (760)789-9995 to get started.

Curious about refinancing? Give us a call: (760)789-9995.

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