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 loan. Maybe several years ago that was good advice, but since refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a number of benefits that will often make it worth the up-front cost several times over.
Benefits
You could be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced mortgage. You may also be able to "cash out" a portion of your home equity, that you may use to take care of higher interest debts, add on to your home, or finance a vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to build your home equity faster.
Fees and Expenses
All of these advantages do come with some expense, though. You will have the same kinds of expenses and fees as you did with your current mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You might offer to pay discount points (prepaid interest) to get a lower rate of interest. If you pay (on average) 3% of the mortgage loan amount at the start, the savings for the life of the new mortgage can be great. You might hear that these points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult a tax professional before depending on this.
An additional cost that a borrower might consider is that a reduced rate of interest will reduce the interest amount you'll deduct on your taxes. We can help you do the math! Call us at 6784672330.
Most people find that the savings per month quickly balance out the initial expenses of refinancing. We'll help you find out which loan program is ideal for you, looking at your cash on hand, how likely you are to sell your home in the next few years, and the effect refinancing might have on your taxes. Call us at 6784672330 to get you started.
Want to know more about refinancing? Give us a call at 6784672330.