Weighing the Options of Refinancing
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It has been said that only when your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That could have been good advice years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to consider a new loan! Refinancing has a number of advantages that often make it worth the initial cost many times over.
Benefits from Refinancing
When you refinance, you might be able to reduce your interest rate and monthly mortgage payment , sometimes by a lot. You may also have the ability to "cash out" a portion of your home equity, which you will be able use to consolidate debts, make home improvements, or finance a vacation. With reduced rates, you may also be able to build up home equity more quickly by changing to a shorter-term mortgage.
Fees and Expenses
Of course, you will have to pay for your the refinance process. When you refinance, you're paying for basically the same things you paid for at the time you obtained your existing mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You could need to pay points (prepaid interest) to get a more favorable interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the term of the new loan can be substantial. Please consult with a tax professional before acting on hear-say that the points paid may be deducted on your federal income taxes.
Speaking of taxes, when you bring down your interest rate, it follows that you will also be lowering the paid interest amount that you may deduct from your federal income taxes. This is one more expense that borrowers take into consideration. Call us at 1-800-606-2794 to help you do the math.
All things considered, for most the total of up-front costs to refinance will be paid back very quickly in savings each month. We can help you find out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 1-800-606-2794 to get started.
Want to know more about refinancing your home? Call us: 1-800-606-2794.