Weighing the Options of Refinancing
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Some have said that only when your new interest is at least 2 points lower, should you refinance your mortgage. Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it could be time to take a serious look. A refinance is often worth its cost many times over, considering the advantages that it brings, in addition to a lower interest rate.
Advantages
When you refinance, you may be able to lower the interest rate and mortgage payment amount, sometimes considerably. You also could be given the option of tapping into the equity in your house by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to add to your home equity faster.
The Cost
All these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you were charged for during your original mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could offer to pay discount points (prepaid interest) to get a more favorable rate of interest. The amount you'll save on the life of the mortgage loan could be substantial if you've paid up front about three percent of the new loan total. You might be told that points can be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to speak with your tax professional before making decisions based on this.
Speaking of taxes, once your interest rate is lowered, naturally you'll also be lowering the paid interest amount that you'll be able to deduct from your federal income taxes. This is another cost that borrowers take into consideration. Call us at (585) 282-0960 to help you do the math.
All things considered, for most people the total of initial costs to refinance are paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance may 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 (585) 282-0960 to get you started.
Want to know more about refinancing? Call us at (585) 282-0960.