When is Refinancing Worth it?

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Some have said that only if your new interest is at least 2 points below your current rate, should you refinance your mortgage. That may have been valid years ago, but with the fact that refinancing has been costing less recently, it's never the wrong time to consider a new mortgage! A refinanced loan is often worth its cost several times over, factoring in the advantages that come, as well as a reduced interest rate.

Benefits

When you refinance, you might have the ability to reduce your interest rate and mortgage payment , perhaps significantly. You may also have the ability to "cash out" a portion of your home equity, that you will be able use to consolidate debt, improve your home, or finance a vacation. You may have the option to refinance into a shorter-term mortgage, giving you the ability to build your home equity quicker.

The Cost

Of course, you will have to pay for the the refinance process. You will pay the same types of expenses and fees as you did with your existing mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Do the Math

You could offer to pay points (prepaid interest) to gain a better rate of interest. The money you'll save over the life of the mortgage loan may be substantial if you've paid up front about three percent of the new loan total. Please talk to a tax professional before acting on advice that the 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 will deduct on your federal income taxes. We can help you do the math! Call us at 719-331-6278.

In the end, for most the total of up-front costs to refinance are made up soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at 719-331-6278 to get started.

Want to know more about refinancing? Give us a call: 719-331-6278.

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