Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points under your current one? That might have been accurate a while back, but with refinancing dropping in cost over the last few years, it is a good time to explore the options of a new mortgage! A refinanced mortgage can be worth its cost many times over, because of the benefits that it brings, as well as a lower interest rate.

Benefits

You might be able to bring down your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced loan. You might also have the ability to "cash out" some of the built-up equity in your home, which you will be able use to consolidate debt, make home improvements, or take a vacation. With lower interest rates, you might also get the chance to build up home equity faster by switching to a shorter term mortgage.

Fees and Expenses

As you probably expect, you'll have some fees and expenses during your process of refinancing. You will have to pay the same sort of fees as with your existing home loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

Paying points can result in a better interest rate. Your savings on the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan balance. You may be told that the points can be deducted on your income taxes, but because tax regulations are ever-changing, we urge you to consult a tax professional before considering this in your calculations.

Another thing about taxes is that if you reduce your interest rate, naturally you will also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that borrowers take into consideration. Call us at (718) 639-9500 to help you do the math.

Most people find that the monthly savings quickly outweigh the up-front expenses of refinancing. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at (718) 639-9500 to get you started.

Curious about refinancing? Give us a call at (718) 639-9500.

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