Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that states you should only refinance if your new interest rate is at least 2 points below your current rate? Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it could be time to look into it. A refinance is often worth its cost many times over, because of the advantages that it brings, along with a lower interest rate.

Advantages of Refinancing

You may be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with a refinanced mortgage loan. You might also have the option to "cash out" a portion of the built-up equity in your residence, that you are able use to consolidate debt, improve your home, or finance a vacation. You could have the option to refinance into a shorter-term mortgage program, giving you the ability to build up your equity quicker.

Fees and Expenses

Of course, you'll have some fees and expenses during the process of refinancing. You will be charged the same kinds of fees as you did with your current mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You could need to pay points (prepaid interest) to attain a better rate of interest. If you pay (on average) 3% of the mortgage loan amount at the start, the savings for the term of the refinanced loan can be significant. You might hear that these points can be tax deductible, but because tax regulations can be ever-changing, please consult a tax professional before making decisions based on this.

An additional expense that borrowers might 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 (972) 818-0022.

Most borrowers find that the monthly savings quickly outweigh the up-front cost of a refinance. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at (972) 818-0022 to get started.

Want to know more about refinancing your home? Give us a call: (972) 818-0022.