When is Refinancing Worth it?

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Ever hear the old rule of thumb that says you should only refinance if your new interest rate is at least 2 points under your existing rate? That might have been sound advice a while back, but with the fact that refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! A refinanced mortgage is often worth its cost several times over, factoring in the advantages that it brings, in addition to a reduced interest rate.

Advantages of Refinancing

You could be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage loan. Additionally, you could have the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build up home equity faster by changing to a shorter-term loan.

Fees and Expenses

Of course, you will have to pay for the process of refinancing. When you refinance, you're paying for most of the same things you were charged for when you got your current mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

You could offer to pay points (prepaid interest) to attain a lower rate of interest. Your savings on the life of the mortgage might be significant if you've paid up front about three percent of the new loan balance. We recommend that you consult with a tax professional before acting on hear-say that the paid points can be deducted on your federal income taxes.

Another thing about taxes is that when your interest rate is lowered, of course you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at 214-865-7442.

Most borrowers find that the monthly savings quickly balance out the up-front expenses of a refinance. We will help you find out which mortgage loan program is right for you, looking at your cash on hand, how likely you are to sell your house in the near future, and what effect refinancing could have on your taxes. Call us at 214-865-7442 to get started.

Want to know more about refinancing your home? Call us: 214-865-7442.

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