Weighing the Options of Refinancing
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It has been said that only when your new interest will be at least 2 points under your current rate, should you refinance your loan. Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it may be time to look into it. Refinancing your loan has a variety of advantages that will often make it worth the up-front expenditure several times over.
Advantages of Refinancing
You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced mortgage loan. Additionally, you may have the option of pulling out some of the equity in your home by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter term loan.
Fees and Expenses
Of course, you will have to pay for the process of refinancing. You'll pay the same types of fees as with your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can result in a lower interest rate. When you pay (on average) three percent of the mortgage loan amount up front, your savings for the life of the new mortgage can be great. You may be told that these points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, please consult with your tax professional before making any decisions based on this.
One more cost that a borrower may take into account is that a lower interest rate will reduce the interest amount you'll be able to deduct from your federal income taxes. We can help you do the math! Call us at (720) 317-2500.
Most borrowers find that the monthly savings outweigh the up-front cost of refinancing. We'll work with you to determine what program is the ideal fit for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing could have on your taxes. Call us at (720) 317-2500 to get started.
Want to know more about refinancing your home? Give us a call at (720) 317-2500.