Weighing the Options of Refinancing
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Some have said that only when your new interest is at least two points below your current rate, should you refinance your loan. 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. A refinanced mortgage can be worth its cost several times over, because of the advantages that come, in addition to a reduced interest rate.
When you refinance, you might be able to reduce the interest rate and monthly payment amount, sometimes considerably. You may also have the option to "cash out" some of the built-up equity in your home, which you may use to consolidate debts, improve your home, or take a vacation. With reduced interest rates, you may also get the chance to build your home equity faster by changing to a shorter-term mortgage loan.
Expenses and Fees
As you probably expect, you'll have some fees and expenses during your process of refinancing. When you refinance, you're paying for basically the same things you paid for at the time you obtained your original mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
Paying discount points can result in a better interest rate. The amount you will save on the life of the mortgage loan could be significant if you've paid up front about 3% of the new loan total. You might be told that these points can be deducted on your income taxes, but since tax regulations are difficult to keep up with, we urge you to consult with a tax professional before considering this in your calculations.
An additional cost that a borrower may consider is that a reduced rate of interest will lower the interest amount you will be able to deduct on your federal income taxes. Call us at 952 417 8481 to help you do the math.
All things considered, for most borrowers the total of initial costs to refinance are paid back soon in savings each month. We'll help you figure out which mortgage program is the ideal fit for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing will effect your taxes. Call us at 952 417 8481 to get you started.
Curious about refinancing? Call us: 952 417 8481.