When is Refinancing Worth it?
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Looking for mortgage advice? We'll be glad to discuss your mortgage needs! Call us at (610) 296-3600. Ready to get started? Apply Now.
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Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least two points lower than your current one? Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it may be a good time to take a serious look. Refinancing your mortgage has some benefits that often make it worth the initial cost a few times over.
Advantages
You might be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with a refinanced mortgage. You could also have the ability to "cash out" a portion of your home equity, which you may use to take care of higher interest debts, improve your home, or plan a vacation. With lower rates, you may also be able to build up home equity faster by changing to a shorter-term mortgage.
Fees and Expenses
All these advantages do come with some expense, though. You will be charged the same sort of expenses and fees as with your present mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could offer to pay points (prepaid interest) to attain a lower rate of interest. The money you'll save on the life of the loan could be substantial if you have paid up front about 3% of the new loan balance. Please consult with a tax professional before acting on hear-say that any paid points may be deducted on your federal income taxes.
Speaking of taxes, if your interest rate is lowered, it follows that you'll also be lowering the paid interest amount that you will be able to deduct on your federal income taxes. This is one more cost that borrowers take into account. Call us at (610) 296-3600 to help you do the math.
In the end, for most people the amount of up-front costs to refinance are paid back very quickly in monthly savings. We will work with you to find out what program is perfect for you, looking at your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing will probably have on your taxes. Call us at (610) 296-3600 to get started.
Want to know more about refinancing your home? Call us at (610) 296-3600.
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