When is Refinancing Worth it?
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Some have said that only if your new interest is at least two points under your current rate, should you refinance your loan. That may have been accurate a while back, but with the fact that refinancing has been costing less over the last few years, it's never the wrong time to consider a new mortgage! Refinancing your mortgage loan has a variety of benefits that often make it worth the initial cost several times over.
Benefits from Refinancing
You might be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced mortgage loan. Additionally, you might have the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also be able to build up home equity more quickly by switching to a shorter-term mortgage loan.
Fees and Expenses
All of these benefits do cost something, though. With your refinance, you are paying for a lot of the same things you paid for at the time you obtained your current mortgage. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might consider paying points to get a lower interest rate. The amount you will save over the life of the loan might be significant if you have paid up front about 3% of the new loan total. Please consult a tax professional before acting on advice that these paid points may be deducted on your federal income taxes.
Another thing about taxes is that if you lower your interest rate, of course you will also be lowering the interest amount that you'll be able to deduct from your taxes. This is another expense that some borrowers take into consideration. Call us at (434) 975-5626 to help you do the math.
Ultimately, for most borrowers the amount of up-front costs to refinance will be paid back soon in monthly savings. We will work with you to find out what mortgage program is right for you, looking at your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing may have on your taxes. Call us at (434) 975-5626 to get you started.
Curious about refinancing your home? Call us: (434) 975-5626.
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