Is Refinancing Worth the Cost?

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Ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least 2 points under your present one? Perhaps that was sound advice several years ago, but as refinance costs have been falling recently, it may be a good time to look into it. A refinance may be worth its cost many times over, because of the benefits that come, along with a reduced interest rate.

Benefits

When you refinance, you could be able to reduce your interest rate and monthly payment amount, perhaps considerably. You also may have the option of tapping into the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You might be able to refinance into a shorter-term mortgage loan, giving you the ability to build up your home equity quicker.

The Cost

As you probably expect, you will have to pay for your the refinance process. When you refinance, you're paying for a lot of the same things you were charged for during your original mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying points can help you get a better interest rate. Your savings on the life of the mortgage could be substantial if you've paid up front about 3% of the new loan total. You may have heard that the points may be tax deductible, but as tax regulations are difficult to keep up with, please consult a tax professional before considering this in your calculations.

Speaking of taxes, when you lower your interest rate, it follows that you'll also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is another cost that some borrowers take into account. Call us in Le Mars at 712-546-4175, in Sioux Center at 712-722-4545, or in Sioux City at 712-224-5400 to help you do the math.

Most borrowers find that the savings per month outweigh the initial expenses of refinancing. We will work with you to determine what loan program is the right fit for you, looking at your cash on hand, the likelihood of selling your home in the near future, and how refinancing could effect your taxes. Call us in Le Mars at 712-546-4175, in Sioux Center at 712-722-4545, or in Sioux City at 712-224-5400 to get started.