Weighing the Options of Refinancing

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least two points under your current one? Maybe 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. A refinanced loan is often worth its cost many times over, considering the advantages that it brings, in addition to a reduced interest rate.

Benefits from Refinancing

When you refinance, you could be able to lower the interest rate and mortgage payment amount, perhaps by a lot. You could also be able to "cash out" a portion of your home equity, which you can use to consolidate debt, add on to your home, or plan a vacation. With reduced rates, you might also get the chance to build up home equity more quickly by switching to a shorter-term mortgage loan.

Fees and Expenses

All of these advantages do cost something, though. When you refinance, you are paying for most of the same things you paid for during your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might look into paying points to reduce your interest rate. Your savings over the life of the loan might be significant if you've paid up front about 3% of the new loan balance. You might have heard that points can be tax deductible, but because tax regulations are difficult to keep up with, please consult a tax professional before making decisions based on this.

One more expense that borrowers may consider is that a lower rate of interest will reduce the interest amount you will be able to deduct on your taxes. Call us at 405-513-7700 to help you do the math.

In the end, for most borrowers the total of up-front costs to refinance are made up very quickly in monthly savings. We'll help you determine which mortgage program is right for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing will probably have on your taxes. Call us at 405-513-7700 to get started.

Want to know more about refinancing your home? Give us a call: 405-513-7700.

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