Weighing the Options of Refinancing
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Some have said that only if your new interest is at least 2 points below your current rate, should you refinance your mortgage. That could have been good advice a while back, but with refinancing dropping in cost over the last few years, it is a good time to explore the options of a new mortgage! Refinancing your mortgage loan has various advantages that can make it worth the up-front expenditure many times over.
When you refinance, you may be able to lower the interest rate and monthly mortgage payment , perhaps considerably. You also might be given the option of pulling out some of the equity in your home by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also be able to build up home equity faster by moving to a shorter-term mortgage.
All these advantages do cost something, though. When you refinance, you're paying for basically the same things you were charged for when you obtained your original mortgage. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You might think about paying points to reduce your interest rate. The amount you'll save on the life of the mortgage loan might be substantial if you have paid up front about three percent of the new loan total. You might hear that points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.
Speaking of taxes, when you reduce your interest rate, of course you will also be reducing the paid interest amount that you may deduct from your federal income taxes. This is one more expense that some borrowers take into consideration. Call us at 7072522700 to help you do the math.
In the end, for most people the total of initial costs to refinance will be paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at 7072522700 to get you started.
Want to know more about refinancing your home? Give us a call: 7072522700.