Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points under your current one? That may have been accurate years ago, but as refinancing has been costing less in recent years, it is never the wrong time to think about a new mortgage loan! A refinanced mortgage loan can be worth its cost several times over, considering the benefits that can come, along with a lower interest rate.

Advantages of Refinancing

You may be able to lower your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced loan. You could also be able to "cash out" some of your equity, which you may use to take care of higher interest debts, make home improvements, or finance a vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to build up your equity faster.

The Cost

As you probably expect, you'll have to pay for the process of refinancing. You'll have the same types of fees as you did with your current home loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might consider paying points to reduce your interest rate. Your savings on the life of the mortgage could be significant if you have paid up front about three percent of the new loan total. We recommend that you consult with a tax professional before acting on hear-say that any points paid can be deducted on your federal income taxes.

Speaking of taxes, once you bring down your interest rate, naturally you'll also be lowering the interest amount that you will be able to deduct on your taxes. This is another expense that borrowers take into account. Call us at (562) 693-5048 to help you do the math.

Most people find that the savings per month quickly balance out the up-front expenses of a refinance. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at (562) 693-5048 to get you started.

Curious about refinancing? Give us a call at (562) 693-5048.

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