Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least 2 points below your present one? That could have been true a while back, but as refinancing has been costing less recently, it is never the wrong time to consider a new mortgage loan! A refinanced mortgage can be worth its cost many times over, factoring in the benefits that may come, as well as a reduced interest rate.
Advantages of Refinancing
You may be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced mortgage. You may also have the option to "cash out" some of your home 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 more quickly by changing to a shorter term mortgage.
Expenses and Fees
Of course, you will have to pay for the the refinance process. You'll have the same sort of fees as you did with your present mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying discount points can result in a lower interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, the savings for the term of the refinanced mortgage loan can be significant. You might have heard that the points can be tax deductible, but as tax regulations are difficult to keep up with, we urge you to consult with your tax professional before making any decisions based on this.
An additional cost that a borrower might take into account is that a reduced rate of interest will reduce the interest amount you'll deduct from your federal income taxes. Call us at 972-932-9083 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance will be made up soon in monthly savings. We'll work with you to find out which loan program is perfect for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and what effect refinancing will probably have on your taxes. Call us at 972-932-9083 to get you started.
Curious about refinancing your home? Call us: 972-932-9083.