Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points lower than your current rate? Maybe that was good advice a number of years ago, but since refinance costs have been falling recently, it may be a good time to look into it. Refinancing has some benefits that often make it worth the up-front cost many times over.
You may be able to lower your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced mortgage. Additionally, you might have the option of tapping into the equity in your property by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also get the chance to build up home equity faster by moving to a shorter term loan.
Fees and Expenses
Of course, you'll have to pay for your process of refinancing. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can result in a lower interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the refinanced loan can be significant. You might have heard that these points can be tax deductible, but as tax regulations are ever-changing, we urge you to consult with your tax professional before considering this in your calculations.
Another thing about taxes is that once you bring down your interest rate, naturally you will also be reducing the interest amount that you may deduct on your taxes. This is one more cost that some borrowers take into consideration. We can help you do the math! Call us at (816) 525-8000.
All things considered, for most people the amount of initial costs to refinance will be paid back very quickly in savings each month. We'll work with you to find out which mortgage program is ideal for you, considering your cash on hand, the likelihood of selling your home in the next few years, and what effect refinancing could have on your taxes. Call us at (816) 525-8000 to get you started.
Curious about refinancing your home? Call us: (816) 525-8000.
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