When is Refinancing Worth it?

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Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points lower than your present one? Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing has some advantages that can make it worth the up-front cost many times over.

Benefits

You may be able to bring down your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced mortgage. You also could be given the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You may be able to refinance into a shorter-term mortgage, giving you the ability to add to your home equity faster.

Fees and Expenses

As you probably know, you will have some fees and expenses during your process of refinancing. With your refinance, you're paying for basically the same things you paid for at the time you obtained your original mortgage. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Do the Math

You might offer to pay discount points (prepaid interest) to attain a better rate of interest. Your savings over the life of the loan may be significant if you've paid up front about three percent of the new loan balance. You may have heard that these 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.

Another expense that borrowers might take into account is that a reduced rate of interest will reduce the interest amount you'll be able to deduct from your taxes. We can help you do the math! Call us at (773) 774-9040 Ext 121.

All things considered, for most the total of up-front costs to refinance will be made up soon in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your money on hand. Call us at (773) 774-9040 Ext 121 to get you started.

Curious about refinancing your home? Give us a call at (773) 774-9040 Ext 121.

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