Weighing the Options of Refinancing
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Some have said that only when your new interest will be at least 2 points under your current rate, should you refinance your loan. Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it could be time to look into it. Refinancing your loan has a number of advantages that can make it worth the initial cost a few times over.
You could be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced loan. You also might be given the option of tapping into the equity in your home by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You may be able to refinance to a shorter-term mortgage loan, enabling you to build your home equity quicker.
Expenses and Fees
All these advantages do cost something, though. You'll pay the same kinds of fees as you did with your present mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can help you get a lower interest rate. When you pay (on average) 3% of the loan amount up front, the savings for the term of the refinanced mortgage can be substantial. Please consult with a tax professional before acting on advice that the points paid may be deducted on your federal income taxes.
Another expense that a borrower may consider is that a lower interest rate will reduce the interest amount you will deduct from your taxes. Call us at 720-598-8300 to help you do the math.
Ultimately, for most people the total of initial costs to refinance will be made up soon in savings each month. We can help you find out your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 720-598-8300 to get started.
Curious about refinancing your home? Give us a call: 720-598-8300.