Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least two points below your existing rate? Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it could be time to take a serious look. Refinancing has various advantages that can make it worth the up-front expenditure several times over.
When you refinance, you may be able to reduce the interest rate and mortgage payment , sometimes considerably. Additionally, you may have the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you might also get the chance to build your home equity more quickly by changing to a shorter-term mortgage loan.
Expenses and Fees
All these advantages do come with some expense, though. When you refinance, you are paying for basically the same things you paid for during your original mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can get you a lower interest rate. If you pay (on average) three percent of the loan amount up front, the savings for the life of the refinanced mortgage can be great. You may be told that these points may be tax deductible, but since tax regulations can be ever-changing, please consult with a tax professional before depending on this.
Another thing about taxes is that when you lower your interest rate, it follows that you'll also be reducing the paid interest amount that you may deduct on your taxes. This is one more expense that borrowers consider. Call us at (513) 713-1515 to help you do the math.
Most people find that the monthly savings outweigh the up-front expenses of a refinance. We can help you find out what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (513) 713-1515 to get you started.
Want to know more about refinancing? Call us at (513) 713-1515.