Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least two points under your current rate? That could have been accurate a while back, but with the fact that refinancing has been costing less in recent years, it's never the wrong time to consider a new mortgage loan! A refinance can be worth its cost several times over, factoring in the benefits that come, as well as a lower interest rate.

Advantages of Refinancing

When you refinance, you could have the ability to lower your interest rate and monthly mortgage payment amount, sometimes considerably. You may also have the option to "cash out" some of your home equity, that you may use to consolidate debts, make home improvements, or finance a vacation. With reduced interest rates, you might also get the chance to build your home equity more quickly by moving to a shorter term mortgage loan.

Fees and Expenses

All these advantages do cost something, though. When you refinance, you're paying for basically the same things you paid for during your original mortgage. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You could offer to pay points (prepaid interest) to gain a lower interest rate. Your savings over the life of the loan could be substantial if you have paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that the points paid can be deducted on your federal income taxes.

An additional expense that a borrower might consider is that a lower interest rate will lower the interest amount you will deduct on your taxes. We can help you do the math! Call us at 407-834-3377.

Most borrowers find that the monthly savings quickly outweigh the initial expenses of a refinance. We'll work with you to find out which loan program is ideal for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing will have on your taxes. Call us at 407-834-3377 to get you started.

Curious about refinancing your home? Give us a call: 407-834-3377.

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