Weighing the Options of Refinancing
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Some have said that only if your new interest is at least two points lower, should you refinance your mortgage. Maybe several years ago that was wise advice, but as refinance costs have been falling recently, it may be a good time to look into it. A refinanced mortgage loan can be worth its cost several times over, because of the benefits that may come, as well as a lower interest rate.
Advantages
When you refinance, you might have the ability to lower your interest rate and mortgage payment amount, sometimes by a lot. You also could be given the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build up home equity more quickly by changing to a shorter-term mortgage loan.
Fees and Expenses
Of course, you will have to pay for your the refinance process. When you refinance, you are paying for a lot of the same things you were charged for when you got your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might need to pay discount points (prepaid interest) to gain a better rate of interest. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the life of the new loan can be great. We recommend that you consult with a tax professional before acting on rumors that these points paid can be deducted on your taxes.
Speaking of taxes, if you reduce your interest rate, naturally you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another expense that borrowers take into account. Call us at 5122916100 to help you do the math.
In the end, for most people the amount of initial costs to refinance will be paid back very quickly in monthly savings. We will work with you to determine what mortgage loan program is best for you, considering your cash on hand, the likelihood of selling your home in the near future, and the effect refinancing could have on your taxes. Call us at 5122916100 to get you started.
Want to know more about refinancing? Call us at 5122916100.