Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least two points lower than your present one? Maybe several years ago that was good advice, but since refinance costs have been getting lower, it may be a good time to take a serious look. A refinanced mortgage is often worth its cost many times over, considering the advantages that come, along with a lower interest rate.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with a refinanced mortgage loan. You could also be able to "cash out" a portion of your equity, which you may use to take care of higher interest debt, improve your home, or plan a vacation. With reduced rates, you might also get the chance to build up home equity faster by changing to a shorter-term mortgage.
All these advantages do cost something, though. You will have to pay the same kinds of fees as you did with your present mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You could offer to pay points (prepaid interest) to gain a lower rate of interest. Your savings on the life of the mortgage may be substantial if you've paid up front about 3% of the new loan balance. You might have heard that points may be deducted on your income taxes, but since tax regulations can be ever-changing, we urge you to speak with a tax professional before considering this in your calculations.
Speaking of taxes, if you lower your interest rate, it follows that you'll also be lowering the interest amount that you'll be able to deduct on your taxes. This is another cost that some borrowers take into consideration. Call us at 561-395-4264 to help you do the math.
All things considered, for most people the amount of up-front costs to refinance are paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 561-395-4264 to get started.
Want to know more about refinancing? Call us at 561-395-4264.