When is Refinancing Worth it?
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It has been said that only when your new interest is at least 2 points lower, should you refinance your mortgage. Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it could be time to take a serious look. Refinancing your mortgage loan has a variety of advantages that will often make it worth the up-front cost a few times over.
Benefits from Refinancing
You might be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced loan. You may also have the option to "cash out" a portion of your equity, that you can use to take care of higher interest debts, make home improvements, or plan a vacation. You could be able to refinance to a shorter-term mortgage loan, giving you the ability to build up your equity faster.
Expenses and Fees
As you probably know, you'll have some fees and expenses during your the refinance process. You will pay the same types of expenses and fees as you did with your current mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can get you a better interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the new loan can be significant. We recommend that you talk to a tax professional before acting on hear-say that any points paid may be deducted on your federal income taxes.
Another cost that a borrower might consider is that a lower interest rate will reduce the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at 302.227.4747.
Most borrowers find that the savings each month quickly outweigh the up-front cost of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 302.227.4747 to get you started.
Curious about refinancing? Call us at 302.227.4747.
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