Weighing the Options of Refinancing
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Some have said that only if your new interest is at least two points lower, should you refinance your loan. Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it may be time to look into it. Refinancing has some benefits that can make it worth the up-front cost several times over.
Advantages
When you refinance, you may have the ability to lower your interest rate and monthly payment amount, perhaps significantly. You may also have the option to "cash out" some of your home equity, which you may use to take care of higher interest debts, improve your home, or take a vacation. You might be able to refinance into a shorter-term mortgage program, giving you the ability to build up your home equity faster.
Fees and Expenses
All of these advantages do come with some expense, though. With your refinance, you are paying for basically the same things you paid for at the time you got your current mortgage loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying points can result in a better interest rate. Your savings over the life of the loan could be significant if you've paid up front about three percent of the new loan balance. Please consult a tax professional before acting on rumors that these points paid may be deducted on your taxes.
One more expense that a borrower might consider is that a reduced rate of interest will lower the interest amount you'll be able to deduct on your federal income taxes. Call us at 5852820960 to help you do the math.
Ultimately, for most borrowers the amount of initial costs to refinance will be paid back very quickly in savings each month. We will help you determine which program is the ideal fit for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing will effect your taxes. Call us at 5852820960 to get started.
Curious about refinancing? Call us at 5852820960.