Weighing the Options of Refinancing
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It has been said that only when your new interest is at least two points lower, should you refinance your loan. That could have been sound advice a while back, but with refinancing dropping in cost in recent years, it is never the wrong time to think about a new loan! Refinancing has some benefits that will often make it worth the initial expenditure many times over.
Advantages of Refinancing
When you refinance, you might be able to lower your interest rate and monthly mortgage payment , perhaps by a lot. Additionally, you might be given the option of tapping into the equity in your home by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage loan, enabling you to add to your equity quicker.
The Cost
All these advantages do come with some expense, though. You will have the same types of fees as you did with your existing home loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You could need to pay points (prepaid interest) to attain a lower rate of interest. The money you'll save over the life of the loan could be significant if you have paid up front about three percent of the new loan balance. You may hear that these points may be deducted on your income taxes, but because tax regulations can be ever-changing, please consult your tax professional before considering this in your calculations.
Another thing about taxes is that if your interest rate is reduced, of course you will also be lowering the interest amount that you'll be able to deduct from your taxes. This is one more cost that some borrowers take into account. Call us at 866-300-1550 to help you do the math.
Most borrowers find that the savings per month quickly outweigh the up-front cost of a refinance. We can help you find 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 866-300-1550 to get you started.
Curious about refinancing? Give us a call: 866-300-1550.