You may
decide to refinance to accomplish a variety of goals, but
for some basic reasons: To save money by getting a lower interest
rate or to save money by using a tax-deductible loan (the
refinance) to pay off non-tax-deductible debt.
People most commonly use a refinance loan to:
» Convert a higher interest
rate mortgage to a lower interest rate mortgage
» Lower their cost of
debt by converting non-tax-deductible debt, such as credit
cards or car loans, to tax-deductible mortgage debt.
» Convert an adjustable
rate mortgage to a fixed rate.
» Consolidate a first
and second mortgage into one lower-rate mortgage.
» To get cash for family
needs/expenses (tuition, medical expenses, etc.)
» To reduce the term
of their mortgage.
The key point to remember in all these instances is a refinanced
mortgage offers you tax-deductible borrowing (which effectively
lowers your cost of borrowing).
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