Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least 2 points below your existing one? That could have been sound advice years ago, but since refinancing has been costing less in recent years, it is a good time to explore the options of a new mortgage loan! A refinanced mortgage loan is often worth its cost many times over, considering the benefits that can come, along with a reduced interest rate.

Advantages of Refinancing

You might be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced loan. You may also have the ability to "cash out" a portion of the built-up equity in your home, that you can use to take care of higher interest debts, add on to your home, or take a vacation. You may have the option to refinance to a shorter-term mortgage, enabling you to build your home equity faster.

Expenses and Fees

Of course, you'll have to pay for your process of refinancing. You will be charged the same kinds of expenses and fees as you did with your present home loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Doing the Math

You might look into paying points to be given a reduced interest rate. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the refinanced mortgage can be substantial. You may be told that these points can be tax deductible, but as tax regulations can be difficult to keep up with, please speak with a tax professional before considering this in your calculations.

Another cost that borrowers might take into account is that a reduced rate of interest will lower the interest amount you'll deduct on your federal income taxes. Call us at 214-718-7183 to help you do the math.

All things considered, for most borrowers the amount of initial costs to refinance are paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 214-718-7183 to get you started.

Want to know more about refinancing? Call us at 214-718-7183.