Weighing the Options of Refinancing

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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least 2 points lower than your present one? That might have been valid a while back, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage loan! Refinancing your mortgage has various advantages that will often make it worth the initial expenditure several times over.

Advantages of Refinancing

You may be able to lower your interest rate (sometimes by a lot) and have smaller monthly payments with a refinanced mortgage. You could also have the option to "cash out" a portion of the built-up equity in your residence, which you are able use to consolidate debt, improve your home, or plan a vacation. You may have the option to refinance to a shorter-term mortgage loan, giving you the ability to build up your home equity faster.

Expenses and Fees

All of these benefits do cost something, though. You'll be charged the same kinds of expenses and fees as you did with your present mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might offer to pay discount points (prepaid interest) to attain a better interest rate. The money you'll save on the life of the loan might be significant if you've paid up front about three percent of the new loan balance. You may hear that these points may be tax deductible, but since tax regulations are difficult to keep up with, we urge you to speak with your tax professional before depending on this.

Speaking of taxes, if you reduce your interest rate, naturally you'll also be reducing the paid interest amount that you can deduct from your federal income taxes. This is another expense that borrowers take into consideration. Call us at 8165258000 to help you do the math.

Most borrowers find that the monthly savings balance out the initial expenses of a refinance. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at 8165258000 to get you started.

Curious about refinancing? Give us a call at 8165258000.

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