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 mortgage. Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it could be a good time to look into it. A refinance is often worth its cost several times over, considering the benefits that may come, as well as a reduced interest rate.

Benefits

When you refinance, you might be able to reduce the interest rate and monthly payment amount, sometimes by a lot. Additionally, you could be given the option of tapping into the equity in your house by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build up home equity more quickly by switching to a shorter-term mortgage.

The Cost

All of these benefits do come with some expense, though. You will be charged the same types of fees as with your existing mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You could offer to pay discount points (prepaid interest) to attain a lower interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the refinanced mortgage loan can be significant. We recommend that you consult with a tax professional before acting on advice that the paid points may be deducted on your federal income taxes.

Speaking of taxes, when you lower your interest rate, it follows that you will also be reducing the interest amount that you may deduct from your taxes. This is one more expense that some borrowers consider. Call us at (800) 974-0509 to help you do the math.

Most people find that the monthly savings quickly outweigh the up-front expenses of refinancing. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (800) 974-0509 to get you started.

Curious about refinancing your home? Call us: (800) 974-0509.