Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points below your existing one? Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinanced loan may be worth its cost several times over, because of the advantages that may come, in addition to a reduced interest rate.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage loan. You may also be able to "cash out" some of the built-up equity in your home, which you can use to consolidate debts, add on to your home, or finance a vacation. You might be able to refinance into a shorter-term mortgage, enabling you to build up your home equity quicker.
Expenses and Fees
As you probably expect, you'll have some fees and expenses during the the refinance process. You'll pay the same types of fees as you did with your current mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying points can help you get a lower interest rate. When you pay (on average) 3% of the loan amount initially, the savings for the term of the refinanced mortgage loan can be significant. You may be told that points can be tax deductible, but as tax regulations are ever-changing, we urge you to consult your tax professional before considering this in your calculations.
Another cost that a borrower may consider is that a lower rate of interest will reduce the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at .
In the end, for most people the amount of up-front costs to refinance are made up very quickly in monthly savings. We can help you find out what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at to get you started.
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