Weighing the Options of Refinancing

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Some have said that only in the case your new interest will be at least 2 points below your current rate, should you refinance your loan. That could have been sound advice a while back, but since refinancing has been costing less in recent years, it's a good time to consider a new mortgage! Refinancing your mortgage has various benefits that can make it worth the up-front cost many times over.

Benefits from Refinancing

When you refinance, you might be able to lower the interest rate and monthly mortgage payment , perhaps significantly. You also might be given the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter term loan.

The Cost

As you probably know, you will have to pay for the process of refinancing. When you refinance, you're paying for a lot of the same things you were charged for during your existing mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You could need to pay points (prepaid interest) to get a lower interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the refinanced loan can be great. You may be told that these points can be deducted on your income taxes, but because tax regulations are ever-changing, please speak with your tax professional before considering this in your calculations.

Speaking of taxes, when you bring down your interest rate, naturally you will also be reducing the interest amount that you will be able to deduct from your taxes. This is one more cost that borrowers take into consideration. Call us at 754-202-4376 to help you do the math.

Most people find that the savings each month quickly outweigh the initial cost of a refinance. We'll work with you to determine what mortgage program is right for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and what effect refinancing will have on your taxes. Call us at 754-202-4376 to get you started.

Curious about refinancing? Call us: 754-202-4376.

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