Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate is at least two points under your present rate? Perhaps that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing your mortgage loan has various benefits that can make it worth the initial cost several times over.

Benefits from Refinancing

When you refinance, you could be able to reduce your interest rate and monthly mortgage payment amount, perhaps by a lot. You also could be given the option of pulling out some of the equity in your house by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage, enabling you to build your home equity faster.

Expenses and Fees

As you probably know, you will have to pay for the the refinance process. When you refinance, you are paying for basically the same things you paid for during your original mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying points can get you a better interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the life of the refinanced loan can be significant. We recommend that you consult with a tax professional before acting on rumors that the points paid may be deducted on your taxes.

Another expense that a borrower might take into account is that a reduced interest rate will lower the interest amount you'll be able to deduct on your federal income taxes. We can help you do the math! Call us at 8002526633.

Ultimately, for most people the total of up-front costs to refinance will be made up very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at 8002526633 to get you started.

Want to know more about refinancing? Give us a call at 8002526633.

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