Weighing the Options of Refinancing
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Some have said that only when your new interest is at least two points below your current rate, should you refinance your mortgage. Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it may be time to look into it. Refinancing has a number of benefits that will often make it worth the up-front expenditure a few times over.
Advantages of Refinancing
You may be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced mortgage loan. You might also be able to "cash out" some of the built-up equity in your home, that you can use to take care of higher interest debt, make home improvements, or finance a vacation. You may be able to refinance to a shorter-term mortgage, giving you the ability to build your equity quicker.
The Cost
As you probably know, you will have some fees and expenses during the the refinance process. With your refinance, you're paying for a lot of the same things you were charged for during your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might offer to pay points (prepaid interest) to attain a lower rate of interest. Your savings on the life of the mortgage loan might be substantial if you have paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on advice that the paid points may be deducted on your federal income taxes.
One more cost that borrowers may consider is that a lower rate of interest will reduce the interest amount you will be able to deduct on your federal income taxes. We can help you do the math! Call us at 7072522700.
In the end, for most borrowers the total of up-front costs to refinance are paid back very quickly in monthly savings. We can help you figure out your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 7072522700 to get started.
Want to know more about refinancing? Call us at 7072522700.