Weighing the Options of Refinancing
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Some have said that only if your new interest is at least 2 points lower, should you refinance your loan. That could have been good advice a while back, but with refinancing dropping in cost over the last few years, it's a good time to think about a new mortgage! Refinancing has some benefits that can make it worth the initial expenditure a few times over.
Benefits from Refinancing
You could be able to lower your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage. You could also have the option to "cash out" some of your home equity, that you may use to consolidate debt, add on to your home, or take a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to add to your equity quicker.
The Cost
All these advantages do cost something, though. When you refinance, you are paying for basically the same things you were charged for during your current mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Do the Math
You might offer to pay discount points (prepaid interest) to gain a better interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the life of the refinanced mortgage can be substantial. Please consult with a tax professional before acting on advice that these points paid can be deducted on your taxes.
An additional expense that a borrower might take into account is that a lower interest rate will lower the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at .
All things considered, for most people the total of initial costs to refinance will be made up soon in monthly savings. We will help you find out what loan program is perfect for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing might effect your taxes. Call us at to get started.
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