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 two points lower, should you refinance your loan. Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it may be time to look into it. A refinance can be worth its cost several times over, considering the advantages that it brings, in addition to a lower interest rate.
Advantages of Refinancing
You might be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced loan. You could also have the ability to "cash out" a portion of your home equity, that you may use to take care of higher interest debt, improve your home, or take a vacation. With lower interest rates, you may also be able to build up home equity more quickly by changing to a shorter-term loan.
All these benefits do come with some expense, though. You will have to pay the same kinds of expenses and fees as you did with your current home loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might think about paying points to get a better interest rate. When you pay (on average) 3% of the loan amount at the start, the savings for the term of the new mortgage loan can be substantial. You may have heard that these points may be tax deductible, but as tax regulations can be ever-changing, please speak with a tax professional before considering this in your calculations.
Speaking of taxes, when your interest rate is reduced, of course you'll also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is one more cost that borrowers take into account. Call us at 561-395-4264 to help you do the math.
Most people find that the savings per month quickly outweigh the up-front cost of refinancing. We'll work with you to find out which loan program is perfect for you, considering your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing could have on your taxes. Call us at 561-395-4264 to get started.
Want to know more about refinancing? Call us at 561-395-4264.