When is Refinancing Worth it?

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Ever heard the old rule of thumb that states you should only refinance if your new interest rate is at least two points under your current one? That might have been accurate years ago, but since refinancing has been costing less over the last few years, it is never the wrong time to think about a new loan! Refinancing has a number of advantages that can make it worth the initial expenditure several times over.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage. You may also have the option to "cash out" some of your home equity, that you are able use to consolidate debt, make home improvements, or plan a vacation. You might be able to refinance to a shorter-term mortgage program, enabling you to build up your home equity quicker.

Expenses and Fees

As you probably know, you will have to pay for the process of refinancing. When you refinance, you're paying for a lot of the same things you paid for during your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to reduce your interest rate. If you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the new loan can be substantial. We recommend that you consult a tax professional before acting on hear-say that the paid points may be deducted on your federal income taxes.

One more cost that borrowers may consider is that a lower rate of interest will lower the interest amount you'll be able to deduct on your federal income taxes. Call us at 248-644-1200 to help you do the math.

Most borrowers find that the savings per month quickly outweigh the initial expenses of refinancing. We will work with you to figure out which loan program is the right fit for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing can effect your taxes. Call us at 248-644-1200 to get started.

Curious about refinancing? Call us at 248-644-1200.

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