Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate is at least two points under your current one? Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it may be time to take a serious look. Refinancing your loan has a number of benefits that often make it worth the up-front cost a few times over.
Advantages of Refinancing
When you refinance, you may have the ability to reduce the interest rate and mortgage payment amount, perhaps significantly. You might also have the ability to "cash out" a portion of the built-up equity in your home, which you may use to take care of higher interest debts, improve your home, or finance a vacation. With reduced rates, you might also be able to build your home equity more quickly by switching to a shorter term mortgage loan.
Expenses and Fees
All these advantages do cost something, though. When you refinance, you are paying for basically the same things you were charged for when you got your original mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can get you a lower interest rate. The money you will save over the life of the mortgage might be significant if you have paid up front about 3% of the new loan total. You may have heard that these points may be tax deductible, but as tax regulations are difficult to keep up with, please consult your tax professional before considering this in your calculations.
One more expense that borrowers may consider is that a reduced interest rate will reduce the interest amount you will be able to deduct from your taxes. Call us at 9254610500 to help you do the math.
Most borrowers find that the monthly savings balance out the up-front cost of a refinance. We will help you determine what mortgage loan program is the best fit for you, taking into account your cash on hand, how likely you are to sell your residence in the near future, and the effect refinancing will have on your taxes. Call us at 9254610500 to get you started.
Curious about refinancing? Give us a call: 9254610500.