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Mortgage interest has historically been treated differently than all other debt. It is currently the only debt eligible for a reduction in federal income taxes (Please consult a Tax advisor). Refinancing done correctly can be the best financial move consumers make. The first step should always be to sit down with a Mortgage 1 professional to determine financial goals and see if a refinance would be the smart move. Here are 5 Reasons to Refinance;
- Credit score has improved since the original mortgage closing. Normally just adding a mortgage account that has been paid on time for a year or more can have a significant positive impact on an individual’s credit score. Mortgage rates are discounted for every 20 point increase in borrowers credit score up to 740. Depending on how much higher a consumer’s credit score has improved the potential savings could be substantial. Especially if you combine it with number 2
- When homes are purchased with less than a 20% down payment many times the borrower will be required to get Private Mortgage Insurance. (PMI). Refinancing can be a great way to remove those extra premiums for their monthly payments. Since 1991, home values have increased an average of 3.3% each year, according to the Federal Housing Finance Agency’s (FHFA) House Price Index (HPI). Just in the past year, home prices went up an average of 6.0% across the country.
- Reduce the term of the loan. When combined with number one and two on this list a borrower could actually get a similar payment with a big reduction in years left to pay their mortgage. Going from a 30-year to a 15-year mortgage can result in saving thousands in interest over the life of the loan.
- Combining high-interest loans to a lower tax-deductible payment. Student loans, Personal Loans, Auto Loans traditionally are secured with higher interest rates over Mortgage loans. Refinancing them can be a great way to simplify the number of payments made each month and reduce overall monthly payments.
- A low-cost source of cash for home improvements or investments. Home improvements can improve the value of the home and many investments that pay higher than the after-tax cost of can provide a source of income over the cost of a mortgage.
A consumer’s best move to always to sit down with a Mortgage 1 professional to determine the best course of action and match their mortgage to the consumer’s goals. If you would like to start now just call your local Mortgage 1 office.
5 Reasons to Refinance