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The goal of many people when they are refinancing their home is to find the lowest interest rate and lessen their monthly payments. When you are able to get a lower interest rate, you will find that you have the opportunity to refinance your mortgage and take advantage of the lower rate. You should know that a lower interest rate does not always mean that you will save money. You will have to consider all of the costs that are associated with your new home loan. There will be closing costs that go along with the new mortgage. You should analyze the costs of your closing costs in relation to the new interest rate that you will get. It might be that you are not getting the best deal. If you are finding that your closing costs are bigger than the savings that you will get, you might want to reconsider the refinance. There are also some tax consequences that you should consider as well.

Your Deduction

If you are allowed to use your home mortgage as a deduction on your tax form, you might want to look at what a lower payment and mortgage rate will mean to that deduction. There is usually a pretty good sized deduction associated with your mortgage and you will have to give your taxes careful thought when you are thinking about refinancing. You will be paying a lower rate for the year. However, it could mean getting lower tax savings on your return.

Imagine that you are in a position of being just beneath a major tax bracket. Refinancing could end up being quite expensive for you if you choose to do it with a lower interest rate. Your new savings could push you up into the higher tax bracket and cost you a good deal of money. While saving on your mortgage is great, you should consider the amount that you will be paying in taxes every year because of the savings.

Get an Expert

When you are considering the benefits of refinancing, you should consult with a tax expert to find out the ramifications on your taxes. There is some information that will require the expertise of a tax specialist that you may not be aware of. You will not want to make any mistakes while you are trying to determine whether or not you will save money on your home refinance. The specialist should be able to give you all of the information that you will need to make a wise decision on your refinancing plans. It might turn out that refinancing is not the best idea for your tax purposes.

When you are trying to find a tax expert to analyze your refinancing plans, you should ask your friends and family if they know someone that they would recommend. It is best to get the recommendation of someone that you trust when you are looking for a tax specialist to let you know if you should refinance your home. The person that you are looking for should be honest and knowledgeable on all of the tax ramifications of your refinance plans. Make sure that your tax specialist has all of the qualities that will make them able to give you the information that you are looking for. Do some research on the tax specialists in your local area in order to find the best one for your particular case.

Online Resources

If you do not know a tax specialist or have not found a recommendation, there are other options available for you. The cost of a tax specialist might be too much of an expense and you would like to determine tax consequences on your own. There are online calculators that can give you all of the information that you need with just a little bit of information from you. These calculators will work by asking for some information from you and then giving you back the amount of taxes that you will have to pay in the following year that you will refinance. You are also able to try a few different tools to see if there is anything that you can do to change your tax situation.