Weighing the Options of Refinancing
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It has been said that only when your new interest is at least 2 points under your current rate, should you refinance your mortgage. That could have been valid years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to think about a new loan! A refinance can be worth its cost many times over, because of the advantages that it brings, as well as a lower interest rate.
Benefits from Refinancing
You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage loan. You also might be given the option of pulling out some of your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage program, giving you the ability to build up your home equity quicker.
All these benefits do come with some expense, though. When you refinance, you're paying for a lot of the same things you paid for at the time you obtained your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Do the Math
You could need to pay discount points (prepaid interest) to gain a lower interest rate. Your savings on the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan total. You may be told that points can be deducted on your income taxes, but since tax regulations are ever-changing, please consult your tax professional before considering this in your calculations.
Another expense that a borrower might take into account is that a lower interest rate will lower the interest amount you'll deduct from your federal income taxes. Call us at (303) 993-6358 to help you do the math.
Most people find that the savings each month quickly balance out the up-front cost of a refinance. We can help you explore your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at (303) 993-6358 to get started.
Curious about refinancing your home? Call us at (303) 993-6358.