Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least two points below your current rate? That may have been valid years ago, but since refinancing has been costing less recently, it is a good time to consider a new mortgage! A refinanced mortgage can be worth its cost many times over, because of the benefits that may come, along with a lower interest rate.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and make smaller mortgage payments with a refinanced loan. Additionally, you could have the option of pulling out some of your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage program, giving you the ability to build up your home equity faster.

Expenses and Fees

All these advantages do come with some expense, though. With your refinance, you are paying for most of the same things you were charged for at the time you got your current mortgage loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Do the Math

Paying discount points can get you a better interest rate. Your savings on the life of the mortgage loan could be significant if you've paid up front about 3% of the new loan balance. You may have heard that the points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, please speak with a tax professional before considering this in your calculations.

One more cost that borrowers 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 (901) 861-8022.

All things considered, for most borrowers the total of up-front costs to refinance will be made up soon in savings each month. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (901) 861-8022 to get you started.

Want to know more about refinancing your home? Call us: (901) 861-8022.