Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least two points under your present one? Perhaps that was good advice several years ago, but as refinance costs have been falling recently, it may be time to take a serious look. Refinancing has various advantages that can make it worth the up-front cost many times over.

Advantages

When you refinance, you may have the ability to lower the interest rate and mortgage payment , sometimes considerably. You may also have the ability to "cash out" a portion of your equity, which you will be able use to take care of higher interest debt, make home improvements, or take a vacation. You could have the option to refinance to a shorter-term mortgage program, enabling you to build your home equity quicker.

Expenses and Fees

Of course, you'll have to pay for your process of refinancing. You'll have to pay the same types of fees as you did with your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might think about paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount at the start, the savings for the term of the refinanced mortgage can be great. We recommend that you consult a tax professional before acting on advice that these points paid can be deducted on your taxes.

Another thing about taxes is that when you lower your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is another expense that some borrowers take into account. Call us at 2603382561 to help you do the math.

All things considered, for most the total of initial costs to refinance will be made up soon in savings each month. We'll work with you to determine what program is right for you, considering your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing may have on your taxes. Call us at 2603382561 to get you started.

Want to know more about refinancing your home? Call us at 2603382561.

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