Weighing the Options of Refinancing
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Ever hear the old rule of thumb that says you should only refinance if your new interest rate will be at least two points lower than your present rate? Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has some advantages that will often make it worth the up-front expenditure many times over.
When you refinance, you may be able to lower your interest rate and monthly payment , perhaps by a lot. You might also be able to "cash out" some of the built-up equity in your residence, which you will be able use to consolidate debt, improve your home, or plan a vacation. With reduced interest rates, you might also be able to build up home equity faster by moving to a shorter-term mortgage.
Fees and Expenses
As you probably know, you'll have to pay for your the refinance process. When you refinance, you're paying for many of the same things you were charged for during your existing mortgage loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You might consider paying points to receive a lower interest rate. Your savings over the life of the loan could be significant if you've paid up front about 3% of the new loan total. You might be told that these points may be deducted on your income taxes, but because tax regulations are ever-changing, we urge you to consult with a tax professional before depending on this.
One more cost that a borrower may consider is that a lower interest rate will lower the interest amount you will deduct from your taxes. Call us at 804-768-9519 to help you do the math.
All things considered, for most people the amount of initial costs to refinance are paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 804-768-9519 to get started.