When is Refinancing Worth it?

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Ever hear the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least 2 points lower than your existing rate? Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it may be time to look into it. A refinance may be worth its cost many times over, because of the benefits that it brings, as well as a lower interest rate.

Advantages of Refinancing

When you refinance, you might be able to lower your interest rate and monthly mortgage payment amount, perhaps considerably. You may also be able to "cash out" a portion of your home equity, that you can use to consolidate debts, add on to your home, or plan a vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to build your home equity quicker.

Expenses and Fees

All of these benefits do come with some expense, though. When you refinance, you're paying for a lot of the same things you paid for during your current mortgage. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

You could offer to pay points (prepaid interest) to get a lower rate of interest. If you pay (on average) 3% of the loan amount at the start, the savings for the life of the new mortgage loan can be significant. We recommend that you consult a tax professional before acting on rumors that these points paid may be deducted on your taxes.

One more cost that a borrower might consider is that a reduced interest rate will reduce the interest amount you'll deduct from your taxes. We can help you do the math! Call us at 7027302085.

Ultimately, for most the total of initial costs to refinance are made up very quickly in monthly savings. We will work with you to figure out which mortgage loan program is best for you, considering your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing may have on your taxes. Call us at 7027302085 to get you started.

Want to know more about refinancing? Call us at 7027302085.

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