Weighing the Options of Refinancing
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Some have said that only in the case your new interest is at least 2 points lower, should you refinance your mortgage. That might have been valid years ago, but with refinancing dropping in cost recently, it's a good time to explore the options of a new loan! Refinancing your mortgage loan has some benefits that will often make it worth the up-front expenditure many times over.
When you refinance, you may be able to reduce the interest rate and monthly payment amount, sometimes significantly. You could also have the ability to "cash out" some of the built-up equity in your home, which you may use to consolidate debts, make home improvements, or take a vacation. With reduced rates, you might also get the chance to build your home equity faster by switching to a shorter-term loan.
Fees and Expenses
All of these advantages do come with some expense, though. You will be charged the same sort of expenses and fees as with your present mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could need to pay discount points (prepaid interest) to attain a better interest rate. The amount you'll save on the life of the loan may be significant if you have paid up front about three percent of the new loan balance. You might hear that the points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, please consult with a tax professional before making decisions based on this.
Another thing about taxes is that when you lower your interest rate, naturally you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at (434) 975-5626.
All things considered, for most the total of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (434) 975-5626 to get started.
Curious about refinancing your home? Call us at (434) 975-5626.