When is Refinancing Worth it?
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Ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least two points lower than your current rate? That may have been accurate years ago, but since refinancing has been costing less recently, it is a good time to think about a new mortgage! A refinance is often worth its cost several times over, factoring in the advantages that it brings, along with a lower interest rate.
Benefits
You could be able to lower your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced mortgage. You may also be able to "cash out" some of your home equity, which you will be able use to consolidate debts, make home improvements, or take a vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to build up your home equity faster.
The Cost
As you probably know, you'll have to pay for the process of refinancing. You will be charged the same kinds of fees as you did with your present mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might need to pay discount points (prepaid interest) to get a better interest rate. Your savings on the life of the mortgage may be significant if you have paid up front about 3% of the new loan total. We recommend that you talk to a tax professional before acting on rumors that the points paid may be deducted on your taxes.
One more cost that a borrower may take into account is that a reduced interest rate will reduce the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at (816) 795-7878.
Most borrowers find that the savings each month outweigh the initial expenses of refinancing. We will help you determine which mortgage program is ideal for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing will effect your taxes. Call us at (816) 795-7878 to get you started.
Want to know more about refinancing your home? Give us a call: (816) 795-7878.
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