When is Refinancing Worth it?
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In the market for a new mortgage loan? We'd be thrilled to discuss our mortgage offerings! Call us at 260-338-2561. Ready to begin? Apply Here.
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Ever hear the pearl of wisdom that states you should only consider refinancing if the new interest rate is at least two points below your present one? Maybe that was good advice several years ago, but as refinance costs have been falling recently, it may be time to look into it. Refinancing your mortgage has various advantages that can make it worth the up-front expenditure several times over.
Advantages
When you refinance, you might be able to reduce the interest rate and monthly mortgage payment amount, sometimes considerably. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also get the chance to build your home equity faster by moving to a shorter-term mortgage loan.
The Cost
Of course, you'll have some fees and expenses during the process of refinancing. With your refinance, you are paying for most of the same things you paid for during your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could need to pay discount points (prepaid interest) to get a lower interest rate. Your savings over the life of the loan might be substantial if you've paid up front about 3% of the new loan total. Please consult a tax professional before acting on advice that any points paid can be deducted on your taxes.
Another thing about taxes is that once your interest rate is lowered, it follows that you'll also be lowering the interest amount that you'll be able to deduct from your taxes. This is another cost that some borrowers take into account. We can help you do the math! Call us at 260-338-2561.
Most borrowers find that the savings each month balance out the initial cost of a refinance. We will work with you to determine which mortgage loan program is right for you, taking into account your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing may have on your taxes. Call us at 260-338-2561 to get you started.
Curious about refinancing? Give us a call at 260-338-2561.
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