Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points lower than your present one? Perhaps that was sound advice a number of years ago, but since refinance costs have been getting lower, it may be time to take a serious look. A refinanced mortgage may be worth its cost several times over, because of the benefits that it brings, as well as a lower interest rate.
When you refinance, you may have the ability to lower the interest rate and mortgage payment amount, sometimes by a lot. You could also be able to "cash out" some of your equity, which you will be able use to take care of higher interest debts, improve your home, or finance a vacation. You could have the option to refinance into a shorter-term mortgage, enabling you to add to your equity quicker.
Fees and Expenses
All of these benefits do come with some expense, though. You will have the same kinds of expenses and fees as you did with your existing mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You might look into paying points to receive a lower interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the new loan can be substantial. You might have heard that these points can be tax deductible, but since tax regulations are difficult to keep up with, we urge you to consult your tax professional before making decisions based on this.
One more expense that borrowers might take into account is that a lower interest rate will reduce the interest amount you'll be able to deduct from your taxes. Call us at (334) 285-8850 to help you do the math.
Most borrowers find that the monthly savings quickly outweigh the up-front expenses of a refinance. We can help you figure out your options, 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 (334) 285-8850 to get started.
Want to know more about refinancing your home? Call us at (334) 285-8850.