Weighing the Options of Refinancing

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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate is at least two points lower than your present one? Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing your loan has a number of benefits that can make it worth the initial expenditure several times over.

Benefits from Refinancing

When you refinance, you could have the ability to reduce your interest rate and monthly mortgage payment amount, perhaps by a lot. You may also have the ability to "cash out" some of your equity, which you may use to consolidate debt, improve your home, or take a vacation. With reduced rates, you may also be able to build your home equity more quickly by moving to a shorter-term mortgage.

Fees and Expenses

All these advantages do come with some expense, though. You will have the same kinds of expenses and fees as you did with your present mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

Paying discount points can help you attain a lower interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the new mortgage loan can be substantial. We recommend that you talk to a tax professional before acting on rumors that any points paid can be deducted on your taxes.

Another cost that borrowers might consider is that a reduced interest rate will reduce the interest amount you'll deduct on your federal income taxes. Call us at 504-866-5626 to help you do the math.

Most people find that the monthly savings quickly outweigh the initial cost of refinancing. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at 504-866-5626 to get started.

Want to know more about refinancing your home? Call us: 504-866-5626.

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