Weighing the Options of Refinancing
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Some have said that only if your new interest will be at least 2 points under your current rate, should you refinance your loan. Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it may be a good time to take a serious look. A refinance is often worth its cost several times over, factoring in the benefits that may come, along with a lower interest rate.
Benefits from Refinancing
You could be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with your refinanced mortgage. You also might have the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter-term mortgage.
Of course, you'll have to pay for your the refinance process. You'll be charged the same kinds of fees as you did with your current mortgage loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might look into paying points to reduce your interest rate. The money you'll save over the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan total. Please consult with a tax professional before acting on advice that these points paid may be deducted on your federal income taxes.
Speaking of taxes, once you bring down your interest rate, of course you will also be lowering the interest amount that you'll be able to deduct from your taxes. This is one more cost that borrowers take into account. Call us at 516-431-2009 to help you do the math.
Most people find that the monthly savings quickly outweigh the up-front cost of a refinance. We will help you figure out which program is right for you, considering your cash on hand, the likelihood of selling your home in the next few years, and what effect refinancing might have on your taxes. Call us at 516-431-2009 to get started.