Weighing the Options of Refinancing

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate is at least 2 points under your current one? Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it may be time to look into it. A refinanced mortgage loan is often worth its cost many times over, considering the benefits that can come, in addition to a reduced interest rate.

Benefits

You could be able to bring down your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage. You also may have the option of tapping into the equity in your house by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build your home equity more quickly by moving to a shorter term mortgage.

Fees and Expenses

All of these benefits do come with some expense, though. With your refinance, you are paying for basically the same things you were charged for at the time you got your original mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might look into paying points to reduce your interest rate. When you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the refinanced mortgage can be significant. You might have heard that these points may be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to speak with a tax professional before depending on this.

One more expense that borrowers might take into account is that a reduced interest rate will reduce the interest amount you'll deduct on your federal income taxes. Call us at 4357556622 to help you do the math.

All things considered, for most borrowers the amount of initial costs to refinance are paid back soon in monthly savings. We can help you find out your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 4357556622 to get started.

Want to know more about refinancing? Call us at 4357556622.