Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only refinance if the new interest rate is at least 2 points lower than your present one? That could have been good advice years ago, but as refinancing has been costing less recently, it's a good time to explore the options of a new loan! A refinance is often worth its cost many times over, considering the advantages that can come, along with a lower interest rate.
Advantages of Refinancing
When you refinance, you may be able to lower your interest rate and monthly mortgage payment , sometimes considerably. You may also have the ability to "cash out" a portion of the built-up equity in your residence, which you may use to take care of higher interest debts, add on to your home, or plan a vacation. You might be able to refinance to a shorter-term mortgage loan, enabling you to add to your home equity quicker.
As you probably know, you will have to pay for your process of refinancing. You'll be charged the same sort of expenses and fees as you did with your current mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying discount points can result in a better interest rate. Your savings over the life of the loan could be substantial if you've paid up front about 3% of the new loan balance. We recommend that you consult with a tax professional before acting on hear-say that the paid points can be deducted on your taxes.
An additional cost that a borrower may consider is that a reduced interest rate will reduce the interest amount you'll deduct from your federal income taxes. Call us at 703-288-0777 to help you do the math.
Most people find that the monthly savings quickly balance out the up-front cost of refinancing. We will work with you to find out what mortgage program is ideal for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing might have on your taxes. Call us at 703-288-0777 to get you started.
Curious about refinancing your home? Call us at 703-288-0777.
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