Weighing the Options of Refinancing
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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points below your present rate? That may have been sound advice a while back, but with refinancing dropping in cost over the last few years, it is never the wrong time to think about a new loan! Refinancing your loan has a variety of advantages that can make it worth the initial cost many times over.
Benefits
You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage. You could also be able to "cash out" a portion of your equity, that you may use to take care of higher interest debt, add on to your home, or take a vacation. You may be able to refinance into a shorter-term mortgage loan, enabling you to build your home equity quicker.
Fees and Expenses
All these benefits do come with some expense, though. With your refinance, you are paying for most of the same things you paid for when you got your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might need to pay discount points (prepaid interest) to get a more favorable interest rate. If you pay (on average) three percent of the loan amount at the start, your savings for the life of the new mortgage can be great. Please talk to a tax professional before acting on hear-say that the points paid may be deducted on your federal income taxes.
Another thing about taxes is that when you bring down your interest rate, naturally you will also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is another expense that borrowers take into account. Call us at 7205988300 to help you do the math.
Most people find that the savings per month quickly balance out the initial expenses of a refinance. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at 7205988300 to get started.
Want to know more about refinancing? Call us at 7205988300.