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 mortgage. Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it could be time to look into it. Refinancing your mortgage loan has various advantages that can make it worth the up-front cost a few times over.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced mortgage. Additionally, you might be given the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build your home equity more quickly by changing to a shorter term loan.
Expenses and Fees
Of course, you'll have some fees and expenses during the the refinance process. You'll pay the same kinds of expenses and fees as with your existing mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can result in a lower interest rate. The amount you will save over the life of the loan could be substantial if you have paid up front about 3% of the new loan balance. You might be told that points can be tax deductible, but because tax regulations are difficult to keep up with, we urge you to speak with a tax professional before depending on this.
Another thing about taxes is that once you lower your interest rate, of course you will also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that some borrowers take into account. Call us at (303) 877-0415 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance will be paid back soon in savings each month. We'll help you find out what program is right for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and how refinancing might effect your taxes. Call us at (303) 877-0415 to get started.
Curious about refinancing? Give us a call: (303) 877-0415.