Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points lower than your current one? That might have been valid a while back, but with refinancing dropping in cost over the last few years, it is a good time to consider a new mortgage! A refinance can be worth its cost many times over, factoring in the advantages that may come, as well as a reduced interest rate.
Advantages
When you refinance, you may have the ability to lower the interest rate and mortgage payment , sometimes by a lot. You might also be able to "cash out" a portion of your equity, that you are able use to take care of higher interest debts, improve your home, or take a vacation. With lower rates, you might also get the chance to build your home equity faster by changing to a shorter-term mortgage.
The Cost
All of these benefits do cost something, though. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You could offer to pay points (prepaid interest) to get a more favorable interest rate. Your savings over the life of the mortgage loan might be significant if you have paid up front about three percent of the new loan total. You might have heard that the points may be deducted on your income taxes, but since tax regulations are ever-changing, please consult a tax professional before depending on this.
Speaking of taxes, when your interest rate is lowered, naturally you will also be reducing the interest amount that you will be able to deduct on your federal income taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at 561-207-8082.
In the end, for most people the amount of initial costs to refinance will be made up soon in savings each month. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 561-207-8082 to get you started.
Curious about refinancing your home? Call us: 561-207-8082.