Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points below your current rate? That could have been valid a while back, but with refinancing dropping in cost in recent years, it's never the wrong time to consider a new mortgage loan! Refinancing has some advantages that will often make it worth the up-front expenditure many times over.
Advantages of Refinancing
You might be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with your refinanced mortgage. You might also have the option to "cash out" some of your home equity, which you will be able use to consolidate debt, improve your home, or plan a vacation. With lower interest rates, you might also be able to build your home equity faster by changing to a shorter term mortgage loan.
Expenses and Fees
All these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you were charged for during your current mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might think about paying points to get a better interest rate. If you pay (on average) three percent of the loan amount at the start, the savings for the life of the refinanced mortgage loan can be significant. Please talk to a tax professional before acting on rumors that any points paid can be deducted on your federal income taxes.
Another cost that a borrower may consider is that a lower rate of interest will lower the interest amount you will be able to deduct on your federal income taxes. Call us at (732) 969-9300 to help you do the math.
Most borrowers find that the monthly savings balance out the up-front expenses of a refinance. We'll help you determine what program is best for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing can effect your taxes. Call us at (732) 969-9300 to get you started.
Want to know more about refinancing your home? Give us a call at (732) 969-9300.