When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points under your existing one? That could have been sound advice years ago, but with refinancing dropping in cost over the last few years, it is a good time to consider a new mortgage! Refinancing has a number of advantages that will often make it worth the up-front expenditure a few times over.

Benefits

You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage. You may also have the option to "cash out" some of your equity, which you will be able use to take care of higher interest debts, improve your home, or finance a vacation. With lower rates, you may also get the chance to build your home equity faster by moving to a shorter-term loan.

The Cost

As you probably know, you'll have to pay for your process of refinancing. You'll be charged the same kinds of expenses and fees as with your present mortgage. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might investigate paying points to receive a better interest rate. If you pay (on average) three percent of the loan amount initially, your savings for the life of the new mortgage loan can be substantial. You may hear that the points may be deducted on your income taxes, but as tax regulations can be ever-changing, please consult with your tax professional before making any decisions based on this.

Another thing about taxes is that once your interest rate is reduced, of course you'll also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that borrowers take into account. We can help you do the math! Call us at (773) 774-9040 Ext 121.

Most people find that the savings each month balance out the initial cost of refinancing. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (773) 774-9040 Ext 121 to get you started.

Curious about refinancing? Call us: (773) 774-9040 Ext 121.

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