When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points below your present one? Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it could be time to take a serious look. Refinancing has various benefits that will often make it worth the up-front expenditure a few times over.

Benefits

When you refinance, you might have the ability to lower the interest rate and mortgage payment amount, perhaps considerably. Additionally, you may be given the option of tapping into the equity in your home by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build your home equity more quickly by moving to a shorter term mortgage loan.

The Cost

All of these benefits do cost something, though. With your refinance, you're paying for basically the same things you paid for during your current mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can get you a lower interest rate. The amount you'll save over the life of the mortgage loan could be substantial if you have paid up front about three percent of the new loan total. You might have heard that points may be tax deductible, but because tax regulations can be ever-changing, please speak with a tax professional before making any decisions based on this.

Another thing about taxes is that once your interest rate is lowered, naturally you'll also be reducing the paid interest amount that you will be able to deduct from your taxes. This is one more cost 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 paid back very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 2603382561 to get started.

Want to know more about refinancing? Give us a call at 2603382561.

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