Weighing the Options of Refinancing
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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points lower than your present rate? That might have been true years ago, but as refinancing has been costing less recently, it's never the wrong time to explore the options of a new mortgage! A refinance is often worth its cost several times over, because of the benefits that come, as well as a reduced interest rate.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with a refinanced mortgage. Additionally, you could be given the option of pulling out some of the equity in your property by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build your home equity faster by moving to a shorter-term mortgage.
All these advantages do cost something, though. You will be charged the same types of fees as with your present home loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might offer to pay discount points (prepaid interest) to gain a more favorable interest rate. The money you'll save over the life of the mortgage loan may be substantial if you have paid up front about 3% of the new loan balance. You might have heard that these points may be deducted on your income taxes, but as tax regulations are ever-changing, please speak with your tax professional before considering this in your calculations.
Another thing about taxes is that if your interest rate is reduced, of course you will also be reducing the interest amount that you will be able to deduct on your federal income taxes. This is one more cost that some borrowers take into account. Call us at 754-202-4376 to help you do the math.
Most people find that the monthly savings outweigh the up-front expenses of refinancing. We can help you explore your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your cash on hand. Call us at 754-202-4376 to get you started.
Curious about refinancing your home? Give us a call: 754-202-4376.