Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least 2 points under your existing rate? Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it could be time to look into it. A refinanced mortgage is often worth its cost several times over, because of the advantages that it brings, along with a lower interest rate.
When you refinance, you could be able to lower the interest rate and mortgage payment , perhaps considerably. You also could have the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage loan, giving you the ability to build your equity quicker.
Fees and Expenses
All of these benefits do cost something, though. You'll have the same sort of fees as you did with your current mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might investigate paying points to be given a lower interest rate. The amount you'll save on the life of the loan might be substantial if you have paid up front about 3% of the new loan balance. You may be told that points can be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please consult your tax professional before making any decisions based on this.
Another thing about taxes is that if you lower your interest rate, naturally you'll also be reducing the paid interest amount that you will be able to deduct on your federal income taxes. This is one more expense that some borrowers take into consideration. Call us at 701.222.0100 to help you do the math.
In the end, for most the amount of initial costs to refinance will be made up soon in savings each month. We can help you explore what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 701.222.0100 to get started.
Want to know more about refinancing? Give us a call: 701.222.0100.