When is Refinancing Worth it?

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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points under your present rate? Maybe that was good advice several years ago, but as refinance costs have been getting lower, it could be time to take a serious look. Refinancing has a number of benefits that can make it worth the up-front cost several times over.

Benefits from Refinancing

You could be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You may also have the option to "cash out" some of the built-up equity in your home, which you can use to take care of higher interest debts, make home improvements, or plan a vacation. You could be able to refinance into a shorter-term mortgage program, enabling you to add to your home equity quicker.

Expenses and Fees

Of course, you will have to pay for the the refinance process. With your refinance, you're paying for basically the same things you paid for when you obtained your current mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Doing the Math

Paying points can get you a lower interest rate. The amount you will save on the life of the mortgage could be substantial if you have paid up front about three percent of the new loan total. Please consult a tax professional before acting on hear-say that the paid points can be deducted on your federal income taxes.

Another expense that borrowers may 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 623-340-0934 to help you do the math.

Ultimately, for most people the total of initial costs to refinance are made up very quickly in monthly savings. We can help you find out what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at 623-340-0934 to get started.

Want to know more about refinancing? Give us a call: 623-340-0934.

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