Recently a refinance question was posed to me that I thought was very interesting. And, I had never been asked the question before.
The mortgage applicant was questioning whether refinancing to a lower rate was a good idea because they would pay less interest and therefore have less of a deduction.
Coincidentally I also saw an article along similar lines in today's Star Ledger.
The bottom line is this, as the ledger article says very well, "Don't let the mortgage interest deduction on your income taxes be the tail wagging the dog when it comes to managing the financing on your family home. What you want to manage is the after-tax interest expense on your mortgage."
In other words if you refinance and lose $1,000 in interest deduction over the next 12 months however you save $3,000 in mortgage expense, you win!
All this can be determined with an amortization schedule and brief analysis. I recommend consulting your tax adviser before making a final decision.
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