When is Refinancing Worth it?
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Some have said that only when your new interest is at least two points below your current rate, should you refinance your loan. That could have been accurate years ago, but since 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 may come, in addition to a reduced interest rate.
Advantages of Refinancing
You could be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage. You could also have the ability to "cash out" a portion of your equity, which you will be able use to consolidate debt, make home improvements, or plan a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by changing to a shorter-term mortgage.
Fees and Expenses
Of course, you'll have to pay for the the refinance process. You will pay the same types of fees as you did with your existing mortgage. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might think about paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount initially, the savings for the life of the new loan can be great. Please consult with a tax professional before acting on hear-say that these points paid may be deducted on your taxes.
Speaking of taxes, when your interest rate is reduced, naturally you will also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that some borrowers take into consideration. Call us at 754-202-4376 to help you do the math.
All things considered, for most people the total of initial costs to refinance will be made up very quickly in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your cash on hand. Call us at 754-202-4376 to get you started.
Want to know more about refinancing? Give us a call: 754-202-4376.