Weighing the Options of Refinancing
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Some have said that only in the case your new interest will be at least 2 points under your current rate, should you refinance your loan. Perhaps several years ago that was sage advice, but since refinance costs have been getting lower, it may be time to look into it. A refinanced mortgage can be worth its cost several times over, considering the advantages that it brings, as well as a reduced interest rate.
You may be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced loan. You could also have the ability to "cash out" a portion of your equity, that you will be able use to consolidate debt, improve your home, or plan a vacation. With lower rates, you may also get the chance to build up home equity faster by changing to a shorter term mortgage loan.
Fees and Expenses
As you probably expect, you will have some fees and expenses during the the refinance process. When you refinance, you are paying for basically the same things you were charged for when you obtained your existing mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could need to pay discount points (prepaid interest) to attain a more favorable rate of interest. The amount you'll save on the life of the loan might be significant if you have paid up front about three percent of the new loan total. You might have heard that these points may be tax deductible, but as tax regulations are ever-changing, please consult a tax professional before making decisions based on this.
Speaking of taxes, once you bring down your interest rate, naturally you'll also be reducing the interest amount that you'll be able to deduct from your taxes. This is another cost that borrowers take into consideration. Call us at 6507631924 to help you do the math.
Ultimately, for most borrowers the total of up-front costs to refinance will be paid back very quickly in monthly savings. We will help you determine which mortgage loan program is the right fit for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and the effect refinancing might have on your taxes. Call us at 6507631924 to get started.
Want to know more about refinancing? Call us at 6507631924.