Weighing the Options of Refinancing
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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least two points lower than your current one? That could have been sound advice years ago, but with refinancing dropping in cost over the last few years, it's a good time to consider a new loan! A refinanced mortgage loan is often worth its cost many times over, factoring in the benefits that it brings, along with a reduced interest rate.
Advantages
When you refinance, you may be able to reduce the interest rate and monthly mortgage payment , sometimes considerably. You might also have the ability to "cash out" a portion of the built-up equity in your home, which you may use to take care of higher interest debts, make home improvements, or plan a vacation. With lower interest rates, you might also be able to build up home equity more quickly by changing to a shorter-term mortgage loan.
Fees and Expenses
All these benefits do come with some expense, though. You'll have to pay the same sort of expenses and fees as with your current mortgage. These could include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might look into paying points to get a better interest rate. If you pay (on average) 3% of the loan amount initially, the savings for the term of the refinanced mortgage loan can be significant. Please talk to a tax professional before acting on rumors that any points paid may be deducted on your federal income taxes.
Another cost that a borrower may consider is that a lower rate of interest will lower the interest amount you will deduct from your federal income taxes. Call us at 3038627760 to help you do the math.
Most people find that the monthly savings outweigh the initial cost of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at 3038627760 to get started.
Want to know more about refinancing? Give us a call: 3038627760.