When is Refinancing Worth it?
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It has been said that only in the case your new interest is at least 2 points under your current rate, should you refinance your loan. Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it may be time to look into it. A refinance is often worth its cost many times over, factoring in the benefits that can come, in addition to a reduced interest rate.
Advantages
You might be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced loan. You also might have the option of tapping into the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also be able to build your home equity faster by moving to a shorter-term mortgage loan.
Expenses and Fees
Of course, you'll have to pay for your the refinance process. With your refinance, you're paying for most of the same things you paid for during your current mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might need to pay discount points (prepaid interest) to attain a more favorable rate of interest. Your savings over the life of the mortgage loan may be substantial if you've paid up front about 3% of the new loan balance. We recommend that you consult with a tax professional before acting on advice that the points paid may be deducted on your taxes.
One more cost that a borrower may consider is that a lower rate of interest will lower the interest amount you'll deduct on your taxes. Call us at 8088830740 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the initial cost of a refinance. We will help you determine what mortgage loan program is the right fit for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing could effect your taxes. Call us at 8088830740 to get you started.
Curious about refinancing your home? Give us a call at 8088830740.
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