When is Refinancing Worth it?
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Some have said that only when your new interest will be at least 2 points lower, should you refinance your loan. That might have been accurate a while back, but with the fact that refinancing has been costing less recently, it's a good time to think about a new loan! Refinancing has a number of advantages that often make it worth the up-front cost several times over.
Advantages of Refinancing
You could be able to lower your interest rate (sometimes significantly) and make smaller monthly payments with your refinanced mortgage loan. Additionally, you might have the option of pulling out some of the equity in your property by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build your home equity faster by moving to a shorter term loan.
As you probably expect, you'll have some fees and expenses during the process of refinancing. You'll be charged the same sort of expenses and fees as you did with your present mortgage loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might look into paying points to receive a reduced interest rate. When you pay (on average) three percent of the loan amount initially, the savings for the life of the refinanced loan can be substantial. You may have heard that these points can be tax deductible, but since tax regulations are ever-changing, please speak with a tax professional before considering this in your calculations.
Speaking of taxes, once you bring down your interest rate, naturally you will also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is another cost that some borrowers take into account. We can help you do the math! Call us at (585) 282-0960.
In the end, for most borrowers the amount of up-front costs to refinance will be paid back very quickly in monthly savings. We'll help you figure out which mortgage program is ideal for you, considering your cash on hand, the likelihood of selling your home in the near future, and how refinancing could effect your taxes. Call us at (585) 282-0960 to get started.
Curious about refinancing? Give us a call at (585) 282-0960.