Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least two points lower than your current rate? Maybe several years ago that was good advice, but since refinance costs have been getting lower, it could be a good time to look into it. Refinancing your mortgage has various advantages that can make it worth the initial cost many times over.

Benefits from Refinancing

When you refinance, you might be able to lower your interest rate and mortgage payment amount, sometimes by a lot. You might also have the option to "cash out" a portion of the built-up equity in your home, which you can use to take care of higher interest debts, add on to your home, or plan a vacation. With reduced interest rates, you may also get the chance to build up home equity more quickly by moving to a shorter-term mortgage.

Fees and Expenses

As you probably expect, you will have to pay for your process of refinancing. You will have to pay the same sort of expenses and fees as with your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might investigate paying points to reduce your interest rate. When you pay (on average) three percent of the mortgage loan amount up front, your savings for the life of the refinanced loan can be substantial. You might be told that the points may be tax deductible, but since tax regulations can be difficult to keep up with, we urge you to speak with your tax professional before considering this in your calculations.

Speaking of taxes, when you lower your interest rate, naturally you will also be lowering the interest amount that you'll be able to deduct on your taxes. This is another expense that some borrowers consider. Call us at 754-202-4376 to help you do the math.

In the end, for most the amount of up-front costs to refinance will be paid back soon in savings each month. We'll work with you to find out which mortgage loan program is ideal for you, taking into account your cash on hand, the likelihood of selling your home in the near future, and how refinancing will effect your taxes. Call us at 754-202-4376 to get started.

Want to know more about refinancing? Call us at 754-202-4376.

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