Weighing the Options of Refinancing
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Ever hear the old rule of thumb that says you should only refinance if your new interest rate is at least 2 points under your current rate? Maybe that was good advice a number of years ago, but as refinance costs have been getting lower, it could be time to look into it. Refinancing has a number of benefits that can make it worth the up-front expenditure a few times over.
Benefits
When you refinance, you might have the ability to reduce your interest rate and monthly payment amount, sometimes significantly. You also might have the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also get the chance to build your home equity more quickly by switching to a shorter-term mortgage.
The Cost
As you probably know, you will have to pay for the process of refinancing. You will have the same sort of expenses and fees as with your current home loan. Included in the list will probably 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. Your savings over the life of the mortgage may be significant if you have paid up front about three percent of the new loan balance. You might be told that the points may be tax deductible, but because tax regulations can be difficult to keep up with, please consult with your tax professional before making any decisions based on this.
One more cost that a borrower may consider is that a lower rate of interest will reduce the interest amount you will be able to deduct on your federal income taxes. We can help you do the math! Call us at 4056158543.
In the end, for most people the amount of up-front costs to refinance are paid back very quickly in monthly savings. We can help you find out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 4056158543 to get started.
Want to know more about refinancing your home? Call us at 4056158543.