Weighing the Options of Refinancing

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Some have said that only when your new interest is at least two points lower, should you refinance your loan. That could have been valid a while back, but with refinancing dropping in cost in recent years, it's a good time to explore the options of a new mortgage! Refinancing your mortgage has a variety of benefits that can make it worth the initial expenditure many times over.

Advantages

When you refinance, you might be able to reduce your interest rate and monthly mortgage payment amount, sometimes considerably. You might also have the option to "cash out" a portion of the built-up equity in your home, which you will be able use to take care of higher interest debts, add on to your home, or finance a vacation. You might have the option to refinance into a shorter-term mortgage, enabling you to build your equity faster.

The Cost

All of these benefits do cost something, though. When you refinance, you're paying for many of the same things you were charged for at the time you obtained your original mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might offer to pay discount points (prepaid interest) to attain a better rate of interest. If you pay (on average) 3% of the loan amount up front, your savings for the life of the refinanced mortgage loan can be substantial. Please consult with a tax professional before acting on hear-say that any points paid may be deducted on your federal income taxes.

Speaking of taxes, once you reduce your interest rate, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is another cost that some borrowers consider. Call us at 206-920-1112 to help you do the math.

All things considered, for most the amount of initial costs to refinance will be made up soon in monthly savings. We'll work with you to determine what mortgage program is perfect for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing will effect your taxes. Call us at 206-920-1112 to get started.

Want to know more about refinancing your home? Call us: 206-920-1112.