Weighing the Options of Refinancing
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Some have said that only if your new interest is at least two points lower, should you refinance your loan. That may have been true a while back, but with refinancing dropping in cost recently, it's never the wrong time to consider a new mortgage loan! Refinancing has a variety of advantages that often make it worth the initial cost many times over.
When you refinance, you might have the ability to lower your interest rate and monthly mortgage payment , perhaps considerably. Additionally, you might be given the option of pulling out some of the equity in your home by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage loan, enabling you to build your home equity faster.
Expenses and Fees
All these benefits do come with some expense, though. You'll have the same sort of expenses and fees as you did with your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could need to pay discount points (prepaid interest) to gain a more favorable rate of interest. When you pay (on average) 3% of the loan amount at the start, your savings for the term of the new mortgage loan can be great. You may have heard that the points can be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to speak with your tax professional before considering this in your calculations.
Another thing about taxes is that once you lower your interest rate, of course you will also be reducing the interest amount that you may deduct on your federal income taxes. This is one more cost that some borrowers consider. Call us at (803) 391-3299 to help you do the math.
Most people find that the monthly savings quickly outweigh the initial cost of refinancing. We can help you find out what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (803) 391-3299 to get started.
Curious about refinancing? Call us at (803) 391-3299.