Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least 2 points lower than your existing rate? Maybe several years ago that was good advice, but as refinance costs have been getting lower, it could be time to take a serious look. A refinanced loan is often worth its cost many times over, considering the advantages that it brings, along with a lower interest rate.
Advantages
When you refinance, you could have the ability to lower the interest rate and monthly mortgage payment , sometimes significantly. You also might have the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you might also be able to build your home equity faster by changing to a shorter-term mortgage.
The Cost
All of these advantages do cost something, though. When you refinance, you're paying for a lot of the same things you were charged for during your current mortgage loan. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You might offer to pay discount points (prepaid interest) to gain a lower interest rate. Your savings over the life of the loan may be substantial if you have paid up front about 3% of the new loan total. Please consult a tax professional before acting on hear-say that any paid points may be deducted on your taxes.
Speaking of taxes, if your interest rate is reduced, of course you'll also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more expense that some borrowers consider. Call us at (321) 777-7277 to help you do the math.
In the end, for most borrowers the total of up-front costs to refinance will be made up soon in savings each month. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (321) 777-7277 to get you started.
Want to know more about refinancing your home? Give us a call at (321) 777-7277.