Weighing the Options of Refinancing

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It has been said that only when your new interest is at least 2 points below your current rate, should you refinance your mortgage. Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing your mortgage has a variety of advantages that can make it worth the up-front cost a few times over.

Advantages of Refinancing

When you refinance, you might have the ability to lower the interest rate and monthly payment amount, sometimes considerably. You could also have the option to "cash out" a portion of your home equity, that you may use to take care of higher interest debts, make home improvements, or take a vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to add to your home equity faster.

The Cost

As you probably know, you will have some fees and expenses during your process of refinancing. You'll be charged the same types of expenses and fees as with your current home loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Do the Math

You might look into paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount initially, the savings for the life of the new mortgage loan can be significant. You may have heard that points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, please consult a tax professional before making any decisions based on this.

An additional expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at (602) 332-9544.

Most people find that the savings per month quickly outweigh the up-front expenses of refinancing. We will help you figure out which mortgage loan program is right for you, considering your cash on hand, how likely you are to sell your home in the near future, and how refinancing might effect your taxes. Call us at (602) 332-9544 to get started.

Curious about refinancing your home? Call us: (602) 332-9544.

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