Weighing the Options of Refinancing

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It has been said that only when your new interest is at least two points under your current rate, should you refinance your mortgage. That could have been valid a while back, but with refinancing dropping in cost recently, it's a good time to consider a new mortgage loan! Refinancing your loan has some benefits that often make it worth the up-front expenditure a few times over.

Benefits

You could be able to bring down your interest rate (sometimes by a lot) and have smaller mortgage payments with your refinanced mortgage loan. Additionally, you could be given the option of tapping into the equity in your property by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to add to your home equity quicker.

The Cost

As you probably know, you will have to pay for your process of refinancing. With your refinance, you are paying for a lot of the same things you were charged for at the time you obtained your current mortgage. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might offer to pay discount points (prepaid interest) to get a more favorable rate of interest. Your savings on the life of the loan could be substantial if you've paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that the paid points may be deducted on your taxes.

Another expense that a borrower might take into account is that a reduced rate of interest will reduce the interest amount you'll be able to deduct on your taxes. Call us at (816) 525-8000 to help you do the math.

Most borrowers find that the savings per month quickly outweigh the initial cost of a refinance. We'll work with you to determine what loan program is the best fit for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing will effect your taxes. Call us at (816) 525-8000 to get started.

Want to know more about refinancing? Call us at (816) 525-8000.

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