Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least two points lower than your present one? Perhaps that was sound advice a number of years ago, but since refinance costs have been falling recently, it could be time to take a serious look. A refinance can be worth its cost several times over, considering the advantages that can come, in addition to a reduced interest rate.
Advantages of Refinancing
You might be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced mortgage loan. You might also have the option to "cash out" a portion of the built-up equity in your home, that you may use to consolidate debts, improve your home, or plan a vacation. You may be able to refinance to a shorter-term mortgage program, giving you the ability to build up your equity quicker.
Fees and Expenses
All these benefits do come with some expense, though. You'll have the same types of expenses and fees as with your current 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 think about paying points to reduce your interest rate. Your savings over the life of the mortgage loan may be significant if you've paid up front about three percent of the new loan total. We recommend that you consult a tax professional before acting on rumors that any paid points can be deducted on your taxes.
An additional expense that borrowers may consider is that a lower rate of interest will reduce the interest amount you'll deduct from your taxes. We can help you do the math! Call us at 3038627760.
Ultimately, for most borrowers the total of initial costs to refinance are made up very quickly in monthly savings. We'll work with you to determine which mortgage loan program is the right fit for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing could effect your taxes. Call us at 3038627760 to get you started.
Want to know more about refinancing your home? Give us a call at 3038627760.