Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points under your present rate? Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it could be a good time to look into it. Refinancing has various advantages that often make it worth the up-front expenditure a few times over.
Advantages
When you refinance, you may have the ability to lower your interest rate and monthly payment , sometimes considerably. You might also be able to "cash out" some of the built-up equity in your home, that you can use to take care of higher interest debt, make home improvements, or take a vacation. You might be able to refinance into a shorter-term mortgage, giving you the ability to add to your equity faster.
Fees and Expenses
All of these benefits do come with some expense, though. With your refinance, you're paying for basically the same things you were charged for when you obtained your original mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might look into paying points to reduce your interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the refinanced mortgage can be substantial. Please consult with a tax professional before acting on advice that any paid points can be deducted on your taxes.
One more expense that a borrower might take into account is that a lower rate of interest will reduce the interest amount you will be able to deduct from your taxes. Call us at 866-300-1550 to help you do the math.
Most borrowers find that the savings each month balance out the initial cost of a refinance. We will work with you to find out what mortgage program is perfect for you, considering your cash on hand, the likelihood of selling your home in the next few years, and what effect refinancing may have on your taxes. Call us at 866-300-1550 to get started.
Want to know more about refinancing your home? Call us at 866-300-1550.