Weighing the Options of Refinancing
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It has been said that only if your new interest will be at least 2 points lower, should you refinance your loan. Maybe several years ago that was good advice, but since 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 benefits that it brings, in addition to a lower interest rate.
Advantages of Refinancing
When you refinance, you could have the ability to reduce the interest rate and monthly mortgage payment amount, perhaps considerably. Additionally, you might be given the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you may also get the chance to build up home equity faster by changing to a shorter-term loan.
The Cost
All of these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for during your existing mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You could need to pay points (prepaid interest) to get a better rate of interest. If you pay (on average) three percent of the mortgage loan amount up front, your savings for the term of the new mortgage can be substantial. You may hear that these points can be tax deductible, but because tax regulations are ever-changing, please consult your tax professional before depending on this.
Another thing about taxes is that once your interest rate is lowered, naturally you'll also be reducing the paid interest amount that you can deduct on your taxes. This is one more expense that some borrowers take into account. Call us at (585) 282-0960 to help you do the math.
Most people find that the savings each month outweigh the initial expenses of refinancing. We'll work with you to determine what program is ideal for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and how refinancing could effect your taxes. Call us at (585) 282-0960 to get you started.
Want to know more about refinancing your home? Give us a call: (585) 282-0960.