Weighing the Options of Refinancing
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Ever hear the old rule of thumb that says you should only refinance if the new interest rate will be at least two points under your present one? Maybe that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be time to look into it. Refinancing your mortgage loan has various advantages that can make it worth the up-front cost many times over.
When you refinance, you might be able to reduce the interest rate and mortgage payment amount, sometimes considerably. You may also have the ability to "cash out" some of your equity, which you may use to take care of higher interest debt, make home improvements, or take a vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to add to your home equity faster.
Expenses and Fees
As you probably expect, you will have to pay for your the refinance process. You will have the same types of fees as you did with your present mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You might consider paying points to reduce your interest rate. Your savings on the life of the loan may be significant if you've paid up front about three percent of the new loan total. We recommend that you talk to a tax professional before acting on advice that the points paid can be deducted on your federal income taxes.
Speaking of taxes, once you reduce your interest rate, of course you will also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that some borrowers take into consideration. We can help you do the math! Call us at (512) 291-6100.
In the end, for most people the total of initial costs to refinance will be paid back soon in savings each month. We can help you figure out your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (512) 291-6100 to get started.
Want to know more about refinancing? Call us: (512) 291-6100.