Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least two points under your existing one? That may have been valid a while back, but with the fact that refinancing has been costing less recently, it is a good time to think about a new loan! A refinance is often worth its cost many times over, because of the benefits that come, along with a lower interest rate.

Advantages

You may be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced mortgage loan. You also might have the option of tapping into the equity in your home by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage, giving you the ability to build your home equity quicker.

Expenses and Fees

All of these advantages do come with some expense, though. With your refinance, you're paying for many of the same things you were charged for during your original mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might offer to pay points (prepaid interest) to gain a lower interest rate. When you pay (on average) 3% of the loan amount up front, the savings for the term of the new loan can be significant. We recommend that you talk to a tax professional before acting on advice that any points paid can be deducted on your federal income taxes.

One more cost that borrowers might consider is that a lower rate of interest will lower the interest amount you'll deduct from your taxes. Call us at (860) 658-7100 to help you do the math.

Most borrowers find that the savings each month quickly outweigh the initial expenses of refinancing. We can help you find out what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (860) 658-7100 to get you started.

Curious about refinancing your home? Give us a call at (860) 658-7100.