When is Refinancing Worth it?

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Some have said that only when your new interest is at least two points lower, should you refinance your loan. That may have been true a while back, but with refinancing dropping in cost recently, it is a good time to explore the options of a new mortgage loan! A refinance can be worth its cost several times over, considering the advantages that it brings, in addition to a lower interest rate.

Benefits from Refinancing

When you refinance, you could have the ability to reduce your interest rate and monthly payment , perhaps significantly. You could also have the option to "cash out" some of your home equity, that you are able use to take care of higher interest debts, improve your home, or plan a vacation. With lower interest rates, you might also get the chance to build your home equity faster by switching to a shorter-term mortgage loan.

Expenses and Fees

As you probably expect, you'll have to pay for your process of refinancing. You will have to pay the same kinds of expenses and fees as you did with your existing mortgage loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Do the Math

You could need to pay discount points (prepaid interest) to attain a more favorable rate of interest. Your savings over the life of the mortgage loan might be significant if you have paid up front about three percent of the new loan balance. Please consult with a tax professional before acting on hear-say that any points paid can be deducted on your taxes.

Speaking of taxes, once your interest rate is reduced, naturally you will also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is another cost that some borrowers consider. Call us at (585) 282-0960 to help you do the math.

In the end, for most the total of up-front costs to refinance are made up soon in savings each month. We can help you figure out 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 money on hand. Call us at (585) 282-0960 to get you started.

Want to know more about refinancing your home? Give us a call: (585) 282-0960.