When is Refinancing Worth it?
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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least two points under your current one? That could have been valid years ago, but with refinancing dropping in cost recently, it is a good time to consider a new mortgage! A refinance is often worth its cost many times over, considering the benefits that it brings, in addition to a reduced interest rate.
Benefits from Refinancing
You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. 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 debt, add on to your home, or plan a vacation. With lower interest rates, you might also be able to build up home equity faster by moving to a shorter-term mortgage loan.
The Cost
All these benefits do come with some expense, though. You will pay the same sort of fees as with your current mortgage. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
Paying discount points can get you a better interest rate. The amount you'll save on the life of the mortgage may be significant if you've paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on advice that these paid points can be deducted on your taxes.
An additional expense that borrowers might consider is that a lower interest rate will lower the interest amount you will be able to deduct on your federal income taxes. Call us at (215) 661-9570 to help you do the math.
All things considered, for most the total of up-front costs to refinance are made up soon in savings each month. We will work with you to find out what loan program is ideal for you, looking at your cash on hand, the likelihood of selling your home in the near future, and the effect refinancing could have on your taxes. Call us at (215) 661-9570 to get started.
Want to know more about refinancing? Give us a call: (215) 661-9570.
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