Weighing the Options of Refinancing
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It has been said that only in the case your new interest is at least 2 points below your current rate, should you refinance your mortgage. That might have been good advice years ago, but as refinancing has been costing less recently, it is never the wrong time to consider a new loan! A refinance is often worth its cost many times over, because of the advantages that come, as well as a reduced interest rate.
You may be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced mortgage loan. Additionally, you could have the option of tapping into the equity in your home by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build up home equity more quickly by moving to a shorter-term loan.
Expenses and Fees
All these advantages do cost something, though. With your refinance, you are paying for basically the same things you were charged for when you got your current mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could offer to pay discount points (prepaid interest) to gain a lower rate of interest. When you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the new loan can be substantial. You may have heard that the points may be tax deductible, but because tax regulations can be ever-changing, please consult with a tax professional before depending on this.
One more cost that a borrower might consider is that a reduced rate of interest will lower the interest amount you will be able to deduct from your taxes. Call us at 719-357-6601 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the up-front expenses of refinancing. We'll work with you to figure out what loan program is right for you, considering your cash on hand, how likely you are to sell your home in the next few years, and how refinancing might effect your taxes. Call us at 719-357-6601 to get started.
Want to know more about refinancing? Call us: 719-357-6601.