Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least two points lower than your existing one? That could have been sound advice a while back, but with refinancing dropping in cost over the last few years, it is never the wrong time to consider a new mortgage loan! Refinancing has some benefits that often make it worth the initial expenditure several times over.
When you refinance, you may be able to lower your interest rate and monthly mortgage payment amount, sometimes significantly. You may also have the ability to "cash out" some of your equity, that you may use to consolidate debt, make home improvements, or finance a vacation. With lower rates, you might also be able to build your home equity more quickly by switching to a shorter term loan.
Expenses and Fees
All of these advantages do cost something, though. You'll pay the same types of expenses and fees as with your existing mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might look into paying points to reduce your interest rate. The amount you will save on the life of the mortgage may be significant if you have paid up front about three percent of the new loan balance. You may hear that these points can be tax deductible, but as tax regulations are difficult to keep up with, please consult a tax professional before making decisions based on this.
Another expense that a borrower might take into account is that a lower rate of interest will lower the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at (800) 288-9693.
Most people find that the monthly savings quickly balance out the up-front cost of a refinance. We can help you figure out your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (800) 288-9693 to get you started.
Curious about refinancing? Give us a call: (800) 288-9693.