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 loan. Perhaps several years ago that was sage advice, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has various benefits that can make it worth the up-front cost many times over.

Advantages of Refinancing

You could be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced mortgage loan. Additionally, you might be given the option of tapping into the equity in your property by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage loan, enabling you to build your home equity faster.

Expenses and Fees

As you probably know, you will have to pay for the process of refinancing. With your refinance, you're paying for basically the same things you paid for when you obtained your current mortgage loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might look into paying points to get a lower interest rate. If you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the new mortgage loan can be great. Please consult with a tax professional before acting on hear-say that these points paid may be deducted on your taxes.

Another thing about taxes is that once you reduce your interest rate, of course you'll also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is another cost that borrowers take into account. Call us at (334) 285-8850 to help you do the math.

Most people find that the monthly savings balance out the initial expenses of refinancing. We will work with you to find out what mortgage program is right for you, considering your cash on hand, how likely you are to sell your home in the next few years, and how refinancing may effect your taxes. Call us at (334) 285-8850 to get started.

Curious about refinancing your home? Give us a call at (334) 285-8850.

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