Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points below your existing rate? Perhaps that was good advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. A refinance can be worth its cost many times over, factoring in the advantages that can come, as well as a lower interest rate.
You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with a refinanced mortgage. Additionally, you might have the option of pulling out some of the equity in your home by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also be able to build up home equity more quickly by changing to a shorter term mortgage loan.
Fees and Expenses
As you probably expect, you will have some fees and expenses during the process of refinancing. With your refinance, you are paying for a lot of the same things you were charged for during your existing mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can result in a better interest rate. Your savings on the life of the mortgage loan could be substantial if you have paid up front about 3% of the new loan balance. You might hear that the points can be tax deductible, but as tax regulations can be ever-changing, please consult with your tax professional before depending on this.
One more cost that a borrower might consider is that a lower rate of interest will reduce the interest amount you will deduct from your taxes. We can help you do the math! Call us at (303) 862-7760.
All things considered, for most borrowers the total of up-front costs to refinance will be paid back soon in savings each month. We'll work with you to figure out which loan program is ideal for you, looking at your cash on hand, how likely you are to sell your house in the next few years, and how refinancing could effect your taxes. Call us at (303) 862-7760 to get started.
Want to know more about refinancing your home? Give us a call at (303) 862-7760.