When is Refinancing Worth it?

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Ever hear the pearl of wisdom that says you should only consider refinancing if your new interest rate will be at least two points under your present rate? Maybe that was good advice several years ago, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing your loan has a number of benefits that can make it worth the initial cost a few times over.

Advantages of Refinancing

You may be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced loan. You might also have the ability to "cash out" some of the built-up equity in your home, which you may use to consolidate debt, make home improvements, or finance a vacation. With lower rates, you may also be able to build up home equity faster by switching to a shorter term mortgage.

Expenses and Fees

As you probably know, you'll have some fees and expenses during your process of refinancing. You will pay the same sort of expenses and fees as you did with your existing mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can get you a lower interest rate. When you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the new mortgage can be great. Please consult with a tax professional before acting on advice that any paid points can be deducted on your taxes.

Another thing about taxes is that when you lower your interest rate, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that some borrowers take into consideration. Call us at 7032880777 to help you do the math.

Most people find that the savings per month quickly balance out the up-front cost of refinancing. We will work with you to figure out which mortgage program is right for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing could effect your taxes. Call us at 7032880777 to get started.

Want to know more about refinancing? Give us a call at 7032880777.

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