Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least two points below your current one? That could have been accurate a while back, but as refinancing has been costing less recently, it's never the wrong time to explore the options of a new loan! A refinanced mortgage is often worth its cost many times over, because of the advantages that it brings, as well as a lower interest rate.
You may be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced mortgage loan. Additionally, you might have the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you may also get the chance to build up home equity more quickly by moving to a shorter-term mortgage.
Expenses and Fees
All of these benefits do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for at the time you got your current mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying points can get you a lower interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the new loan can be significant. You might have heard that points can be deducted on your income taxes, but as tax regulations can be ever-changing, please consult your tax professional before depending on this.
Speaking of taxes, when you lower your interest rate, naturally you will also be lowering the paid interest amount that you may deduct on your federal income taxes. This is one more cost that some borrowers take into consideration. Call us at 754-202-4376 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance will be paid back soon in monthly savings. We'll work with you to figure out what mortgage loan program is the best fit for you, taking into account your cash on hand, the likelihood of selling your home in the near future, and how refinancing might effect your taxes. Call us at 754-202-4376 to get you started.
Want to know more about refinancing? Call us at 754-202-4376.