Weighing the Options of Refinancing
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Some have said that only if your new interest is at least 2 points under your current rate, should you refinance your loan. Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it may be time to take a serious look. A refinance is often worth its cost several times over, because of the benefits that may come, in addition to a lower interest rate.
Advantages of Refinancing
When you refinance, you could have the ability to reduce the interest rate and monthly mortgage payment amount, perhaps by a lot. Additionally, you might have the option of tapping into the equity in your property by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter term loan.
Expenses and Fees
Of course, you'll have to pay for the the refinance process. You will have the same types of fees as you did with your existing home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might offer to pay discount points (prepaid interest) to attain a more favorable interest rate. If you pay (on average) three percent of the mortgage loan amount up front, your savings for the term of the new mortgage can be substantial. Please consult with a tax professional before acting on hear-say that any points paid can be deducted on your federal income taxes.
Speaking of taxes, if you reduce your interest rate, of course you will also be lowering the interest amount that you can deduct from your taxes. This is another expense that some borrowers consider. We can help you do the math! Call us at 3038627760.
All things considered, for most borrowers the amount of up-front costs to refinance are paid back very quickly in savings each month. We'll help you figure out what mortgage loan program is ideal for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing might effect your taxes. Call us at 3038627760 to get started.
Want to know more about refinancing? Give us a call at 3038627760.