Weighing the Options of Refinancing
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Some have said that only if your new interest is at least two points below your current rate, should you refinance your loan. That could have been valid years ago, but with refinancing dropping in cost recently, it's a good time to explore the options of a new mortgage loan! A refinanced mortgage can be worth its cost many times over, because of the advantages that may come, as well as a reduced interest rate.
Advantages of Refinancing
When you refinance, you may have the ability to reduce the interest rate and monthly payment amount, perhaps significantly. You might also have the option to "cash out" a portion of your equity, that you are able use to take care of higher interest debt, add on to your home, or take a vacation. With reduced rates, you may also be able to build your home equity faster by changing to a shorter-term mortgage.
The Cost
As you probably expect, you'll have to pay for the process of refinancing. You'll have to pay the same sort of expenses and fees as with your existing home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might need to pay discount points (prepaid interest) to get a lower rate of interest. The amount you will save over the life of the loan could be significant if you have paid up front about 3% of the new loan total. Please consult with a tax professional before acting on rumors that any paid points can be deducted on your federal income taxes.
Another cost that borrowers may consider is that a reduced rate of interest will lower the interest amount you will be able to deduct from your taxes. Call us at (219) 947-0001 to help you do the math.
All things considered, for most the total of up-front costs to refinance are paid back very quickly in monthly savings. We'll work with you to figure out what program is perfect for you, looking at your cash on hand, how likely you are to sell your house in the near future, and how refinancing will effect your taxes. Call us at (219) 947-0001 to get started.
Curious about refinancing your home? Call us at (219) 947-0001.
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