Weighing the Options of Refinancing

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Ever heard the old rule of thumb that states you should only refinance if your new interest rate is at least 2 points lower than your existing one? That could have been sound advice a while back, but with refinancing dropping in cost recently, it is never the wrong time to consider a new loan! A refinanced mortgage is often worth its cost many times over, because of the benefits that it brings, along with a lower interest rate.

Benefits

You might be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced loan. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. You could have the option to refinance into a shorter-term mortgage loan, giving you the ability to build up your equity quicker.

Expenses and Fees

All these advantages do cost something, though. You'll be charged the same sort of fees as with your current mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You could need to pay points (prepaid interest) to attain a more favorable rate of interest. Your savings over the life of the mortgage could be substantial if you have paid up front about three percent of the new loan balance. You may be told that these points can be tax deductible, but as tax regulations are difficult to keep up with, we urge you to speak with a tax professional before depending on this.

An additional cost that borrowers might take into account is that a lower interest rate will reduce the interest amount you will deduct from your federal income taxes. Call us at (602) 332-9544 to help you do the math.

Ultimately, for most the amount of initial costs to refinance will be made up soon in monthly savings. We will work with you to determine what mortgage program is the ideal fit for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing will probably have on your taxes. Call us at (602) 332-9544 to get started.

Want to know more about refinancing? Give us a call at (602) 332-9544.

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