Weighing the Options of Refinancing
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Some have said that only when your new interest is at least two points under your current rate, should you refinance your loan. That might have been true a while back, but with refinancing dropping in cost recently, it's a good time to think about a new loan! Refinancing has a variety of benefits that will often make it worth the up-front cost many times over.
You could be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced loan. You may also have the ability to "cash out" a portion of the built-up equity in your home, that you will be able use to consolidate debt, make home improvements, or plan a vacation. With reduced interest rates, you might also get the chance to build your home equity faster by switching to a shorter-term mortgage.
All these benefits do cost something, though. With your refinance, you're paying for many of the same things you paid for during your existing mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
Paying discount points can result in a better interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the life of the new mortgage loan can be great. You might be told that the points can be deducted on your income taxes, but because tax regulations can be ever-changing, please speak with your tax professional before considering this in your calculations.
An additional expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct on your taxes. Call us at 810.679.2500 to help you do the math.
Most people find that the savings per month quickly balance out the initial cost of refinancing. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 810.679.2500 to get started.
Want to know more about refinancing? Give us a call: 810.679.2500.