When is Refinancing Worth it?
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It has been said that only when your new interest will be at least two points below your current rate, should you refinance your loan. That could have been true a while back, but with the fact that refinancing has been costing less recently, it is never the wrong time to explore the options of a new mortgage! A refinance is often worth its cost several times over, because of the advantages that it brings, in addition to a lower interest rate.
Advantages of Refinancing
When you refinance, you might be able to lower the interest rate and mortgage payment , perhaps by a lot. You may also have the ability to "cash out" a portion of the built-up equity in your residence, which you can use to take care of higher interest debt, make home improvements, or take a vacation. With reduced interest rates, you might also be able to build up home equity more quickly by switching to a shorter term mortgage.
Of course, you will have to pay for your the refinance process. With your refinance, you're paying for basically the same things you paid for at the time you got your existing mortgage loan. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You could offer to pay discount points (prepaid interest) to attain a more favorable rate of interest. When you pay (on average) three percent of the loan amount initially, your savings for the life of the new loan can be great. We recommend that you talk to a tax professional before acting on advice that these points paid may be deducted on your federal income taxes.
Speaking of taxes, once you reduce your interest rate, it follows that you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is another expense that some borrowers consider. We can help you do the math! Call us at 440-934-2100.
In the end, for most people the total of initial costs to refinance are made up soon in monthly savings. We can help you find out what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 440-934-2100 to get started.
Want to know more about refinancing? Call us at 440-934-2100.