Weighing the Options of Refinancing
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It has been said that only in the case your new interest will be at least two points lower, should you refinance your loan. That might have been sound advice a while back, but since refinancing has been costing less over the last few years, it's never the wrong time to think about a new mortgage loan! A refinance is often worth its cost many times over, considering the advantages that it brings, in addition to a lower interest rate.
Benefits
You might be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced mortgage. Additionally, you may be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage, giving you the ability to build up your equity quicker.
The Cost
As you probably expect, you will have some fees and expenses during your process of refinancing. When you refinance, you are paying for basically the same things you were charged for when you obtained your current mortgage loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could need to pay points (prepaid interest) to attain a better interest rate. The amount you'll save over the life of the mortgage loan might be substantial if you have paid up front about three percent of the new loan balance. Please consult a tax professional before acting on hear-say that these points paid may be deducted on your federal income taxes.
Speaking of taxes, when you lower your interest rate, of course you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another expense that some borrowers consider. Call us at 4104614043 to help you do the math.
All things considered, for most borrowers the total of initial costs to refinance are paid back very quickly in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your cash on hand. Call us at 4104614043 to get you started.
Want to know more about refinancing? Give us a call at 4104614043.