When is Refinancing Worth it?
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Some have said that only in the case your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That could have been accurate years ago, but with the fact that refinancing has been costing less in recent years, it's never the wrong time to think about a new loan! Refinancing your mortgage loan has some advantages that often make it worth the initial cost many times over.
Advantages
When you refinance, you may have the ability to reduce your interest rate and monthly mortgage payment amount, sometimes significantly. Additionally, you might have the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With reduced rates, you may also get the chance to build your home equity faster by switching to a shorter term mortgage.
Fees and Expenses
As you probably expect, you will have some fees and expenses during the the refinance process. With your refinance, you are paying for many of the same things you paid for at the time you obtained your original mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might offer to pay discount points (prepaid interest) to attain a better rate of interest. When you pay (on average) 3% of the loan amount at the start, your savings for the term of the refinanced mortgage can be substantial. You may hear that the points can be deducted on your income taxes, but as tax regulations can be ever-changing, please speak with your tax professional before considering this in your calculations.
Another expense that borrowers might consider is that a reduced rate of interest will lower the interest amount you will deduct on your federal income taxes. Call us at 2603382561 to help you do the math.
Most people find that the savings each month quickly outweigh the initial expenses of refinancing. We can help you find out your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at 2603382561 to get you started.
Curious about refinancing? Call us at 2603382561.