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 is at least 2 points below your existing rate? Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a number of benefits that will often make it worth the initial cost a few times over.
You may be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced loan. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower rates, you might also get the chance to build your home equity more quickly by changing to a shorter-term loan.
Expenses and Fees
All these advantages do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for when you got your current mortgage. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can result in a lower interest rate. The amount you'll save over the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan balance. Please consult a tax professional before acting on advice that these points paid can be deducted on your federal income taxes.
Speaking of taxes, when your interest rate is lowered, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that some borrowers take into account. Call us at 214-663-5355 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the up-front expenses of refinancing. We can help you explore your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 214-663-5355 to get started.
Curious about refinancing? Give us a call: 214-663-5355.