Weighing the Options of Refinancing

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Ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points below your existing one? That might have been valid a while back, but with refinancing dropping in cost recently, it is never the wrong time to explore the options of a new mortgage! Refinancing has various advantages that can make it worth the initial expenditure several times over.

Benefits from Refinancing

You may be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage. You may also have the option to "cash out" a portion of the built-up equity in your residence, that you can use to consolidate debt, make home improvements, or take a vacation. You might be able to refinance to a shorter-term mortgage loan, enabling you to build up your home equity quicker.

Expenses and Fees

All these benefits do cost something, though. When you refinance, you're paying for basically the same things you paid for during your existing mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount up front, your savings for the term of the refinanced mortgage loan can be great. You may hear that points may be tax deductible, but because tax regulations are difficult to keep up with, we urge you to consult with a tax professional before considering this in your calculations.

Another expense that borrowers might consider is that a lower interest rate will reduce the interest amount you will be able to deduct from your taxes. We can help you do the math! Call us at (808) 264-3715.

Ultimately, for most the amount of initial costs to refinance are paid back soon in savings each month. We can help you explore your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your cash on hand. Call us at (808) 264-3715 to get started.

Want to know more about refinancing your home? Call us: (808) 264-3715.

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