Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points under your current rate? Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it may be a good time to look into it. A refinance can be worth its cost several times over, factoring in the advantages that can come, as well as a reduced interest rate.
You might be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced mortgage. Additionally, you may have the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also be able to build your home equity more quickly by changing to a shorter term mortgage loan.
Expenses and Fees
Of course, you'll have some fees and expenses during the process of refinancing. With your refinance, you are paying for basically the same things you were charged for when you got your existing mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could need to pay discount points (prepaid interest) to get a lower interest rate. Your savings on the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan total. We recommend that you consult a tax professional before acting on hear-say that these points paid may be deducted on your taxes.
Speaking of taxes, when you lower your interest rate, of course you will also be reducing the paid interest amount that you will be able to deduct on your taxes. This is one more cost that borrowers consider. We can help you do the math! Call us at 720-598-8300.
In the end, for most people the total of up-front costs to refinance will be made up very quickly in savings each month. We'll work with you to figure out what program is ideal for you, considering your cash on hand, how likely you are to sell your house in the next few years, and the effect refinancing will have on your taxes. Call us at 720-598-8300 to get you started.
Want to know more about refinancing your home? Call us: 720-598-8300.