Weighing the Options of Refinancing

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It has been said that only if your new interest is at least two points under your current rate, should you refinance your mortgage. Perhaps that was good advice several years ago, but as refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing your loan has various advantages that will often make it worth the initial cost several times over.

Benefits

When you refinance, you may have the ability to lower your interest rate and monthly payment , perhaps by a lot. You also could have the option of tapping into the equity in your home by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also be able to build your home equity faster by switching to a shorter term mortgage.

Fees and Expenses

All of these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you paid for during your existing mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might offer to pay points (prepaid interest) to get a better rate of interest. If you pay (on average) 3% of the loan amount at the start, the savings for the life of the new loan can be great. Please consult with a tax professional before acting on advice that any points paid may be deducted on your taxes.

An additional cost that borrowers might take into account is that a lower rate of interest will lower the interest amount you will be able to deduct on your taxes. Call us at (434) 975-5626 to help you do the math.

Most people find that the savings each month quickly outweigh the up-front expenses of a refinance. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (434) 975-5626 to get started.

Want to know more about refinancing your home? Call us at (434) 975-5626.

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