Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least 2 points under your current one? That could have been true years ago, but with refinancing dropping in cost recently, it is never the wrong time to consider a new loan! Refinancing has some advantages that can make it worth the up-front cost many times over.
You may be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You could also be able to "cash out" a portion of the built-up equity in your home, that you may use to consolidate debts, make home improvements, or finance a vacation. You might be able to refinance into a shorter-term mortgage, giving you the ability to add to your equity faster.
Fees and Expenses
All these advantages do cost something, though. You will pay the same kinds of fees as with your current home loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You could offer to pay points (prepaid interest) to get a lower rate of interest. Your savings on the life of the mortgage could be substantial if you've paid up front about three percent of the new loan total. You may be told that points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, please consult your tax professional before considering this in your calculations.
An additional expense that borrowers may consider is that a lower interest rate will reduce the interest amount you'll be able to deduct on your taxes. Call us at 4152449383 to help you do the math.
In the end, for most borrowers the amount of up-front costs to refinance will be made up soon in savings each month. We'll help you figure out what loan program is perfect for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing will probably have on your taxes. Call us at 4152449383 to get you started.
Curious about refinancing? Call us: 4152449383.