Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least two points lower than your current one? That might have been accurate a while back, but with refinancing dropping in cost recently, it is never the wrong time to explore the options of a new loan! A refinance is often worth its cost several times over, considering the benefits that it brings, as well as a lower interest rate.


You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced mortgage loan. You also could have the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage, enabling you to add to your equity quicker.

Fees and Expenses

All of these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for during your current mortgage. Among these will be 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. Your savings on the life of the mortgage loan may be significant if you have paid up front about 3% of the new loan total. We recommend that you talk to a tax professional before acting on rumors that any paid points can be deducted on your federal income taxes.

An additional cost that a borrower may take into account is that a lower interest rate will reduce the interest amount you'll deduct from your taxes. Call us at (302) 765-8089 to help you do the math.

Most people find that the monthly savings quickly outweigh the initial expenses of refinancing. We'll work with you to find out which program is right for you, taking into account your cash on hand, the likelihood of selling your residence in the near future, and how refinancing could effect your taxes. Call us at (302) 765-8089 to get started.

Curious about refinancing your home? Call us at (302) 765-8089.

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