Weighing the Options of Refinancing

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It has been said that only when your new interest is at least two points below your current rate, should you refinance your loan. That may have been true a while back, but with refinancing dropping in cost in recent years, it's a good time to think about a new loan! Refinancing has a number of advantages that will often make it worth the up-front cost several times over.

Benefits from Refinancing

When you refinance, you could have the ability to lower the interest rate and mortgage payment , sometimes by a lot. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage loan, enabling you to add to your equity faster.

The Cost

All these benefits do cost something, though. With your refinance, you're paying for a lot of the same things you were charged for during your existing mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Do the Math

You could offer to pay discount points (prepaid interest) to attain a better rate of interest. When you pay (on average) 3% of the loan amount up front, the savings for the life of the refinanced mortgage can be substantial. You might be told that these points can be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to consult a tax professional before depending on this.

An additional cost that borrowers might take into account is that a lower interest rate will reduce the interest amount you'll be able to deduct on your federal income taxes. Call us at 3038627760 to help you do the math.

In the end, for most people the amount of initial costs to refinance are paid back very quickly in monthly savings. We can help you find out what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at 3038627760 to get started.

Curious about refinancing your home? Give us a call: 3038627760.