Weighing the Options of Refinancing

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Some have said that only in the case your new interest will be at least two points under your current rate, should you refinance your mortgage. Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it may be time to take a serious look. Refinancing your loan has various advantages that can make it worth the up-front expenditure many times over.

Advantages of Refinancing

You might be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage loan. You also might have the option of tapping into the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also get the chance to build your home equity faster by changing to a shorter term mortgage loan.

Fees and Expenses

Of course, you will have to pay for the process of refinancing. When you refinance, you are paying for many of the same things you were charged for during your existing mortgage loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

Paying points can result in a lower interest rate. The amount you'll save over the life of the mortgage loan could be substantial if you have paid up front about 3% of the new loan balance. Please consult a tax professional before acting on hear-say that these points paid may be deducted on your federal income taxes.

Speaking of taxes, if your interest rate is reduced, of course you will also be lowering the interest amount that you will be able to deduct on your federal income taxes. This is one more expense that borrowers consider. Call us at (612) 240-9922 to help you do the math.

In the end, for most the amount of up-front costs to refinance are paid back very quickly in savings each month. We will work with you to determine what mortgage loan program is perfect for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and what effect refinancing could have on your taxes. Call us at (612) 240-9922 to get you started.

Curious about refinancing your home? Call us at (612) 240-9922.

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