Weighing the Options of Refinancing
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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate is at least 2 points below your present one? That may have been valid years ago, but since refinancing has been costing less in recent years, it is never the wrong time to think about a new mortgage! Refinancing your mortgage has a number of benefits that often make it worth the initial expenditure a few times over.
Benefits
When you refinance, you could have the ability to lower the interest rate and monthly payment amount, sometimes significantly. You may also have the ability to "cash out" a portion of your home equity, which you are able use to take care of higher interest debt, add on to your home, or finance a vacation. With lower rates, you might also get the chance to build your home equity faster by moving to a shorter-term loan.
Expenses and Fees
All these benefits do cost something, though. You will pay the same sort of expenses and fees as with your existing mortgage loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could offer to pay points (prepaid interest) to gain a better interest rate. The amount you'll save over the life of the loan could be substantial if you have paid up front about 3% of the new loan total. We recommend that you consult a tax professional before acting on hear-say that these paid points can be deducted on your federal income taxes.
An additional cost that a borrower might consider is that a reduced rate of interest will reduce the interest amount you will be able to deduct from your federal income taxes. Call us at 3038627760 to help you do the math.
Most people find that the savings each month quickly balance out the initial expenses of a refinance. We will work with you to determine what program is right for you, considering your cash on hand, how likely you are to sell your house in the near future, and how refinancing might effect your taxes. Call us at 3038627760 to get started.
Curious about refinancing your home? Give us a call: 3038627760.