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 the new interest rate will be at least 2 points lower than your current rate? That might have been accurate years ago, but with the fact that refinancing has been costing less over the last few years, it is never the wrong time to consider a new mortgage loan! A refinanced loan is often worth its cost several times over, considering the benefits that can come, in addition to a reduced interest rate.

Benefits

When you refinance, you could be able to reduce your interest rate and mortgage payment amount, perhaps significantly. You also may be given the option of tapping into the equity in your property by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build up home equity faster by switching to a shorter-term mortgage.

Fees and Expenses

Of course, you'll have some fees and expenses during your process of refinancing. You'll be charged the same kinds of fees as with your present home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying discount points can get you a lower interest rate. The amount you'll save over the life of the mortgage may be substantial if you've paid up front about three percent of the new loan total. Please talk to a tax professional before acting on rumors that any points paid may be deducted on your taxes.

Speaking of taxes, if your interest rate is reduced, of course you'll also be reducing the interest amount that you can deduct on your federal income taxes. This is another expense that some borrowers take into account. Call us at (985) 429-1770 to help you do the math.

All things considered, for most the total of up-front costs to refinance will be paid back very quickly in savings each month. We'll work with you to determine which mortgage program is right for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and what effect refinancing might have on your taxes. Call us at (985) 429-1770 to get started.

Curious about refinancing your home? Give us a call at (985) 429-1770.

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