When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points lower than your present rate? That might have been good advice years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to think about a new mortgage! A refinance may be worth its cost many times over, factoring in the benefits that may come, along with a lower interest rate.

Advantages of Refinancing

You could be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced mortgage. You also could have the option of tapping into the equity in your property by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter term mortgage.

Fees and Expenses

As you probably expect, you'll have some fees and expenses during your the refinance process. With your refinance, you're paying for a lot of the same things you were charged for when you got your original mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might consider paying points to be given a reduced interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the refinanced loan can be substantial. You might have heard that these points may be deducted on your income taxes, but since tax regulations are ever-changing, please consult with a tax professional before making decisions based on this.

An additional cost that a borrower might consider is that a lower interest rate will lower the interest amount you will deduct on your taxes. Call us at 603-893-6616 to help you do the math.

Most people find that the monthly savings quickly balance out the up-front cost of a refinance. We will work with you to figure out which mortgage loan program is the ideal fit for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing may effect your taxes. Call us at 603-893-6616 to get started.

Want to know more about refinancing? Call us: 603-893-6616.

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