Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least two points lower than your current one? That might have been accurate a while back, but since refinancing has been costing less in recent years, it's a good time to explore the options of a new mortgage! A refinanced loan may be worth its cost many times over, because of the benefits that it brings, as well as a lower interest rate.
Benefits from Refinancing
When you refinance, you may be able to lower the interest rate and mortgage payment amount, perhaps considerably. You might also have the ability to "cash out" some of the built-up equity in your residence, that you are able use to consolidate debt, add on to your home, or take a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by moving to a shorter-term mortgage loan.
Fees and Expenses
Of course, you will have some fees and expenses during your process of refinancing. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage loan. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can get you 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 great. We recommend that you consult a tax professional before acting on rumors that these points paid may be deducted on your taxes.
Another expense that a borrower may take into account is that a reduced interest rate will lower the interest amount you will deduct on your federal income taxes. Call us at (334) 285-8850 to help you do the math.
All things considered, for most people the total of initial costs to refinance are paid back very quickly in savings each month. We'll work with you to figure out which mortgage program is best for you, considering your cash on hand, how likely you are to sell your residence in the near future, and what effect refinancing could have on your taxes. Call us at (334) 285-8850 to get started.
Curious about refinancing your home? Give us a call: (334) 285-8850.