Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that says you should only refinance if your new interest rate is at least two points below your current one? That may have been valid a while back, but with the fact that refinancing has been costing less recently, it's a good time to consider a new mortgage loan! A refinance can be worth its cost several times over, factoring in the benefits that can come, in addition to a reduced interest rate.
Benefits from Refinancing
When you refinance, you could be able to lower your interest rate and monthly payment amount, perhaps significantly. You also may be given the option of tapping into the equity in your property by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You may have the option to refinance to a shorter-term mortgage program, enabling you to add to your home equity faster.
The Cost
As you probably know, you will have some fees and expenses during the process of refinancing. You will have to pay the same sort of expenses and fees as you did with your present mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could offer to pay discount points (prepaid interest) to gain a better rate of interest. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the refinanced loan can be substantial. You might be told that the points can be deducted on your income taxes, but as tax regulations are ever-changing, please consult with a tax professional before depending on this.
Another expense that a borrower might consider is that a lower interest rate will reduce the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at 9254610500.
Most people find that the monthly savings outweigh the up-front cost of a refinance. We can help you explore what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 9254610500 to get started.
Want to know more about refinancing? Call us at 9254610500.