Weighing the Options of Refinancing

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Have you 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 present rate? Maybe several years ago that was good advice, but as refinance costs have been getting lower, it could be a good time to look into it. Refinancing has a number of advantages that can make it worth the up-front expenditure many times over.

Benefits from Refinancing

When you refinance, you could be able to reduce your interest rate and mortgage payment amount, sometimes significantly. Additionally, you might be given the option of pulling out some of the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build your home equity more quickly by moving to a shorter term loan.

Fees and Expenses

Of course, you will have some fees and expenses during the process of refinancing. With your refinance, you are paying for most of the same things you were charged for during your original mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount up front, the savings for the term of the new loan can be great. You may have heard that points may be tax deductible, but since tax regulations are ever-changing, please consult with a tax professional before depending on this.

An additional cost that borrowers may consider is that a reduced interest rate will reduce the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at 7072522700.

Most people find that the monthly savings quickly balance out the initial expenses of refinancing. We'll help you find out which mortgage program is the ideal fit for you, considering your cash on hand, the likelihood of selling your home in the near future, and what effect refinancing will probably have on your taxes. Call us at 7072522700 to get started.

Want to know more about refinancing your home? Call us: 7072522700.

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