Weighing the Options of Refinancing

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Some have said that only when your new interest is at least two points lower, should you refinance your mortgage. That could have been true years ago, but with refinancing dropping in cost in recent years, it is a good time to consider a new loan! Refinancing has a number of benefits that often make it worth the up-front cost many times over.

Advantages

When you refinance, you could have the ability to lower the interest rate and monthly payment amount, perhaps by a lot. You could also have the option to "cash out" a portion of the built-up equity in your residence, that you will be able use to take care of higher interest debts, make home improvements, or finance a vacation. With lower rates, you might also be able to build your home equity more quickly by switching to a shorter term loan.

The Cost

As you probably expect, you'll have some fees and expenses during your the refinance process. You'll have to pay the same kinds of fees as you did with your current mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might offer to pay points (prepaid interest) to get a lower interest rate. The money you'll save over the life of the mortgage might be significant if you've paid up front about three percent of the new loan balance. Please consult a tax professional before acting on advice that any points paid may be deducted on your federal income taxes.

An additional expense that a borrower might consider is that a lower interest rate will lower the interest amount you will be able to deduct on your federal income taxes. We can help you do the math! Call us at 703.255-5810.

Ultimately, for most people the total of initial costs to refinance are made up soon in monthly savings. We will work with you to figure out which mortgage loan program is right for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing may effect your taxes. Call us at 703.255-5810 to get started.

Curious about refinancing your home? Call us at 703.255-5810.

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