Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least two points under your current rate? That could have been accurate years ago, but with the fact that refinancing has been costing less recently, it's never the wrong time to think about a new mortgage! A refinanced mortgage is often worth its cost many times over, because of the benefits that it brings, in addition to a lower interest rate.
Advantages
When you refinance, you may be able to lower the interest rate and mortgage payment amount, perhaps by a lot. You may also be able to "cash out" a portion of the built-up equity in your residence, which you can use to take care of higher interest debts, add on to your home, or finance a vacation. You might be able to refinance into a shorter-term mortgage program, giving you the ability to add to your home equity quicker.
Expenses and Fees
All these advantages do come with some expense, though. You'll have to pay the same sort of fees as you did with your present home loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying points can get you a lower interest rate. The amount you will save over the life of the mortgage could be substantial if you've paid up front about 3% of the new loan balance. You might have heard that the points may be deducted on your income taxes, but since tax regulations are ever-changing, please consult with your tax professional before depending on this.
One more expense that a borrower might consider is that a lower interest rate will reduce the interest amount you will be able to deduct on your taxes. Call us at 720-598-8300 to help you do the math.
All things considered, for most people the total of initial costs to refinance will be made up very quickly in monthly savings. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 720-598-8300 to get started.
Curious about refinancing your home? Call us: 720-598-8300.