Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate is at least 2 points under your existing one? Maybe that was good advice several years ago, but as refinance costs have been falling recently, it may be time to take a serious look. A refinance is often worth its cost several times over, factoring in the benefits that may come, as well as a lower interest rate.

Advantages of Refinancing

When you refinance, you could be able to reduce your interest rate and monthly payment amount, sometimes significantly. You also might be given the option of pulling out some of the equity in your house by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build your home equity faster by changing to a shorter-term loan.

Fees and Expenses

As you probably know, you'll have some fees and expenses during the process of refinancing. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage. These could include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Do the Math

Paying discount points can result in a lower interest rate. The money you'll save on the life of the loan may be significant if you've paid up front about 3% of the new loan total. You might be told that points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, we urge you to speak with your tax professional before depending on this.

Speaking of taxes, when your interest rate is lowered, naturally you'll also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that borrowers take into consideration. Call us at 8165258000 to help you do the math.

Most borrowers find that the savings per month quickly balance out the up-front expenses of a refinance. We will help you figure out what mortgage loan program is ideal for you, taking into account your cash on hand, how likely you are to sell your home in the next few years, and the effect refinancing may have on your taxes. Call us at 8165258000 to get started.

Curious about refinancing? Give us a call: 8165258000.

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