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 loan. Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it could be time to look into it. Refinancing your loan has various benefits that often make it worth the initial cost several times over.
You might be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with a refinanced mortgage. You could also be able to "cash out" some of the built-up equity in your home, which you will be able use to take care of higher interest debts, make home improvements, or finance a vacation. You might be able to refinance to a shorter-term mortgage, giving you the ability to build your home equity quicker.
Fees and Expenses
All these benefits do come with some expense, though. You'll pay the same kinds of expenses and fees as you did with your current home loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Do the Math
You might offer to pay discount points (prepaid interest) to get a lower rate of interest. When you pay (on average) three percent of the mortgage loan amount at the start, the savings for the term of the refinanced mortgage loan can be substantial. You may have heard that points can be tax deductible, but since tax regulations can be difficult to keep up with, please consult with your tax professional before depending on this.
One more expense that a borrower might take into account is that a reduced rate of interest will lower the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at 469-640-0400.
Ultimately, for most the amount of initial costs to refinance will be made up very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 469-640-0400 to get you started.
Curious about refinancing? Give us a call: 469-640-0400.