When is Refinancing Worth it?
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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate is at least 2 points under your current one? That may have been sound advice a while back, but with the fact that refinancing has been costing less recently, it's never the wrong time to explore the options of a new mortgage loan! Refinancing your mortgage has a variety of advantages that often make it worth the up-front expenditure several times over.
Advantages
You may be able to bring down your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced loan. You also might have the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build up home equity faster by switching to a shorter term mortgage.
Expenses and Fees
As you probably expect, you will have some fees and expenses during your the refinance process. You will pay the same sort of fees as with your current home loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You could offer to pay points (prepaid interest) to attain a lower interest rate. Your savings on the life of the loan might be significant if you've paid up front about 3% of the new loan balance. Please consult with a tax professional before acting on hear-say that the paid points may be deducted on your federal income taxes.
One more expense that borrowers may take into account is that a reduced rate of interest will lower the interest amount you will deduct from your federal income taxes. Call us at 8102292820 to help you do the math.
In the end, for most people the total of initial costs to refinance will be made up soon in monthly savings. We can help you find out 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 available cash. Call us at 8102292820 to get you started.
Want to know more about refinancing your home? Call us at 8102292820.