Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least two points lower than your existing one? That may have been valid years ago, but with refinancing dropping in cost in recent years, it is a good time to explore the options of a new mortgage loan! Refinancing your mortgage has some benefits that will often make it worth the up-front expenditure many times over.

Benefits from Refinancing

You could be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced loan. You could also have the option to "cash out" some of the built-up equity in your home, which you are able use to consolidate debts, improve your home, or plan a vacation. With lower 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. You'll pay the same kinds of expenses and fees as with your existing mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You could need to pay points (prepaid interest) to attain a lower rate of interest. The amount you'll save over the life of the mortgage may be substantial if you have paid up front about 3% of the new loan balance. You might have heard that points can be tax deductible, but as tax regulations can be ever-changing, we urge you to speak with your tax professional before depending on this.

One more expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct on your federal income taxes. We can help you do the math! Call us at 877-310-6200.

Ultimately, for most the total of up-front costs to refinance will be made up very quickly in monthly savings. We'll help you figure out which mortgage loan program is perfect for you, considering your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing could have on your taxes. Call us at 877-310-6200 to get you started.

Want to know more about refinancing your home? Call us: 877-310-6200.

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