Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that states you should only refinance if the new interest rate is at least 2 points under your current rate? Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it may be time to look into it. A refinance may be worth its cost many times over, because of the benefits that can come, in addition to a lower interest rate.
You might be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage. You also may be given the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to build your home equity faster.
Fees and Expenses
As you probably expect, you'll have to pay for your process of refinancing. You'll pay the same kinds of fees as you did with your present mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might investigate paying points to reduce your interest rate. Your savings on the life of the mortgage loan might be significant if you've paid up front about three percent of the new loan total. You may hear that points may be tax deductible, but because tax regulations are difficult to keep up with, we urge you to consult a tax professional before depending on this.
Another cost that borrowers might consider is that a reduced rate of interest will reduce the interest amount you'll deduct from your federal income taxes. Call us at 754-202-4376 to help you do the math.
Ultimately, for most borrowers the amount of up-front costs to refinance will be paid back very quickly in savings each month. We'll work with you to determine what program is ideal for you, looking at your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing could have on your taxes. Call us at 754-202-4376 to get started.
Curious about refinancing? Give us a call at 754-202-4376.