Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points below your present one? That may have been valid a while back, but since refinancing has been costing less recently, it's a good time to consider a new mortgage! A refinance is often worth its cost several times over, because of the advantages that it brings, as well as a lower interest rate.
You may be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage loan. You also could be given the option of tapping into the equity in your property by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage, enabling you to build your home equity quicker.
Expenses and Fees
All of these advantages do cost something, though. When you refinance, you're paying for many of the same things you were charged for during your original mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
Paying discount points can help you attain a lower interest rate. When you pay (on average) three percent of the loan amount at the start, the savings for the term of the refinanced mortgage loan can be significant. We recommend that you talk to a tax professional before acting on advice that these points paid can be deducted on your taxes.
Another expense that borrowers may take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct on your taxes. Call us at (732) 969-9300 to help you do the math.
Ultimately, for most borrowers the total of initial costs to refinance are paid back soon in savings each month. We will work with you to find out which mortgage loan program is the best fit for you, looking at your cash on hand, how likely you are to sell your house in the near future, and what effect refinancing may have on your taxes. Call us at (732) 969-9300 to get started.
Want to know more about refinancing your home? Give us a call at (732) 969-9300.