Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only refinance if the new interest rate is at least 2 points under your present rate? Perhaps that was sound advice several years ago, but since refinance costs have been falling recently, it could be time to look into it. Refinancing has various benefits that will often make it worth the up-front expenditure many times over.
You might be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage. You could also have the option to "cash out" some of your home equity, that you are able use to consolidate debts, make home improvements, or plan a vacation. You could have the option to refinance to a shorter-term mortgage loan, giving you the ability to add to your equity quicker.
All these advantages do cost something, though. With your refinance, you're paying for basically the same things you paid for at the time you got your original mortgage. These could include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might think about paying points to reduce your interest rate. If you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the new mortgage can be substantial. You might be told that these points can be tax deductible, but because tax regulations are difficult to keep up with, please consult with a tax professional before considering this in your calculations.
Another cost that a borrower may take into account is that a lower rate of interest will reduce the interest amount you will deduct on your federal income taxes. Call us at 253-848-1255 to help you do the math.
In the end, for most borrowers the total of initial costs to refinance will be made up soon in monthly savings. We'll help you find out what mortgage loan program is best for you, considering your cash on hand, how likely you are to sell your house in the next few years, and how refinancing could effect your taxes. Call us at 253-848-1255 to get you started.
Want to know more about refinancing your home? Call us: 253-848-1255.