When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate is at least 2 points below your present one? Perhaps that was sound advice a number of years ago, but as refinance costs have been getting lower, it could be time to take a serious look. Refinancing has various advantages that can make it worth the initial expenditure several times over.

Advantages

You might be able to lower your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced loan. You might also have the option to "cash out" a portion of your equity, that you are able use to take care of higher interest debt, add on to your home, or finance a vacation. With reduced interest rates, you might also be able to build your home equity more quickly by changing to a shorter term loan.

The Cost

All of these benefits do cost something, though. You will have the same sort of expenses and fees as with your current home loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying points can help you get a better interest rate. Your savings over the life of the mortgage may be substantial if you've paid up front about 3% of the new loan total. We recommend that you talk to a tax professional before acting on hear-say that these points paid can be deducted on your federal income taxes.

Speaking of taxes, when your interest rate is lowered, it follows that you'll also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that some borrowers take into consideration. We can help you do the math! Call us at 253-848-1255.

All things considered, for most borrowers the amount of initial costs to refinance are made up soon in savings each month. We'll help you determine which program is right for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and how refinancing can effect your taxes. Call us at 253-848-1255 to get started.

Want to know more about refinancing? Give us a call at 253-848-1255.

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