Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points lower than your current one? That might have been valid a while back, but with refinancing dropping in cost recently, it is never the wrong time to explore the options of a new mortgage! A refinanced loan is often worth its cost several times over, factoring in the benefits that may come, as well as a lower interest rate.

Advantages of Refinancing

When you refinance, you may be able to reduce your interest rate and monthly mortgage payment amount, sometimes significantly. You may also have the option to "cash out" some of your equity, that you are able use to take care of higher interest debts, make home improvements, or finance a vacation. With lower interest rates, you may also get the chance to build your home equity faster by switching to a shorter-term mortgage loan.

Expenses and Fees

Of course, you will have to pay for the the refinance process. With your refinance, you are paying for basically the same things you paid for during your original mortgage loan. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might need to pay points (prepaid interest) to get a lower interest rate. The money you will save over the life of the loan may be significant if you have paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on advice that any points paid can be deducted on your federal income taxes.

An additional expense that a borrower may take into account is that a reduced rate of interest will reduce the interest amount you'll be able to deduct on your federal income taxes. We can help you do the math! Call us at (720) 550-4235.

Ultimately, for most the amount of initial costs to refinance are made up very quickly in savings each month. We can help you figure out 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 available cash. Call us at (720) 550-4235 to get started.

Curious about refinancing your home? Give us a call at (720) 550-4235.

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