Weighing the Options of Refinancing

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It has been said that only in the case your new interest will be at least 2 points below your current rate, should you refinance your loan. Maybe that was sound advice several years ago, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing your mortgage loan has some advantages that will often make it worth the up-front cost several times over.

Benefits

You might be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced loan. You may also have the ability to "cash out" a portion of your home equity, which you will be able use to take care of higher interest debts, add on to your home, or plan a vacation. With lower interest rates, you might also be able to build your home equity more quickly by moving to a shorter-term mortgage loan.

Expenses and Fees

All of these advantages do cost something, though. When you refinance, you are paying for basically the same things you paid for when you got your original mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might offer to pay discount points (prepaid interest) to get a lower rate of interest. Your savings on the life of the loan could be substantial if you've paid up front about three percent of the new loan total. Please consult with a tax professional before acting on advice that any paid points can be deducted on your federal income taxes.

Another thing about taxes is that once you bring down your interest rate, naturally you will also be reducing the interest amount that you may deduct on your taxes. This is one more expense that borrowers take into consideration. Call us at 7072522700 to help you do the math.

In the end, for most people the amount of initial costs to refinance are paid back soon in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at 7072522700 to get you started.

Curious about refinancing? Give us a call: 7072522700.

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