Weighing the Options of Refinancing
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It has been said that only in the case your new interest will be at least two points below your current rate, should you refinance your loan. That might have been accurate years ago, but as refinancing has been costing less recently, it's a good time to consider a new mortgage! Refinancing your mortgage has a number of benefits that will often make it worth the up-front cost a few times over.
Advantages of Refinancing
When you refinance, you might be able to reduce your interest rate and monthly mortgage payment amount, sometimes significantly. You also may be given the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage, giving you the ability to build your equity faster.
Fees and Expenses
As you probably expect, you'll have to pay for your the refinance process. You'll have to pay the same kinds of fees as you did with your present mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might need to pay points (prepaid interest) to get a better rate of interest. Your savings on the life of the mortgage might be significant if you have paid up front about 3% of the new loan balance. You might be told that these points can be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to consult a tax professional before considering this in your calculations.
Another expense that borrowers may consider is that a reduced interest rate will lower the interest amount you'll be able to deduct on your taxes. Call us at (302) 765-8089 to help you do the math.
In the end, for most people the amount of initial costs to refinance will be made up very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at (302) 765-8089 to get you started.
Curious about refinancing your home? Call us at (302) 765-8089.
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