Weighing the Options of Refinancing

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Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least two points under your present one? Perhaps several years ago that was wise advice, but since refinance costs have been falling recently, it could be time to take a serious look. A refinanced mortgage may be worth its cost several times over, because of the benefits that it brings, along with a lower interest rate.

Advantages

You could be able to bring down your interest rate (sometimes significantly) and have smaller monthly payments with a refinanced mortgage loan. You may also be able to "cash out" a portion of your equity, which you can use to consolidate debt, improve your home, or finance a vacation. You might be able to refinance to a shorter-term mortgage, enabling you to add to your home equity faster.

Fees and Expenses

All these benefits do come with some expense, though. You will pay the same sort of expenses and fees as with your existing home loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might investigate paying points to be given a lower interest rate. If you pay (on average) three percent of the loan amount at the start, your savings for the life of the refinanced mortgage loan can be great. You might have heard that the points may be deducted on your income taxes, but as tax regulations can be difficult to keep up with, please speak with a tax professional before considering this in your calculations.

Speaking of taxes, once your interest rate is reduced, of course you'll also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that borrowers take into consideration. Call us at 561-395-4264 to help you do the math.

Most people find that the savings each month outweigh the up-front cost of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at 561-395-4264 to get you started.

Curious about refinancing your home? Give us a call at 561-395-4264.