When is Refinancing Worth it?

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It has been said that only if your new interest is at least two points under your current rate, should you refinance your mortgage. Maybe several years ago that was wise advice, but as refinance costs have been falling recently, it may be time to take a serious look. Refinancing your mortgage has a variety of benefits that will often make it worth the initial expenditure a few times over.

Benefits

You could be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced loan. You might also have the ability to "cash out" a portion of your home equity, that you may use to take care of higher interest debts, improve your home, or take a vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter-term mortgage loan.

Fees and Expenses

As you probably know, you will have to pay for your process of refinancing. You will pay the same kinds of fees as with your existing home loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You could need to pay discount points (prepaid interest) to gain a lower rate of interest. If you pay (on average) 3% of the loan amount at the start, your savings for the life of the new mortgage can be significant. Please talk to a tax professional before acting on rumors that any paid points can be deducted on your taxes.

Another thing about taxes is that when your interest rate is reduced, of course you'll also be lowering the interest amount that you'll be able to deduct on your federal income taxes. This is another expense that some borrowers take into account. We can help you do the math! Call us at 3217777277.

All things considered, for most borrowers the total of initial costs to refinance will be paid back soon in savings each month. We'll help you determine what program is the right fit for you, considering your cash on hand, the likelihood of selling your home in the next few years, and how refinancing can effect your taxes. Call us at 3217777277 to get you started.

Want to know more about refinancing your home? Call us: 3217777277.

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