Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least two points lower than your present rate? Maybe that was good advice a number of years ago, but since refinance costs have been falling recently, it could be time to look into it. A refinanced mortgage loan is often worth its cost many times over, factoring in the benefits that can come, as well as a lower interest rate.
Advantages of Refinancing
When you refinance, you could have the ability to lower the interest rate and monthly mortgage payment , sometimes significantly. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also be able to build your home equity faster by switching to a shorter-term loan.
Expenses and Fees
All of these benefits do come with some expense, though. You will have the same sort of fees as with your existing mortgage loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You might think about paying points to receive a reduced interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the term of the new loan can be significant. We recommend that you consult a tax professional before acting on advice that these paid points may be deducted on your taxes.
Speaking of taxes, once you lower your interest rate, naturally you'll also be lowering the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that borrowers take into account. Call us at (760)789-9995 to help you do the math.
Most people find that the savings per month quickly balance out the up-front expenses of a refinance. We can help you find out your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at (760)789-9995 to get started.