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 two points lower than your current rate? That might have been good advice years ago, but since refinancing has been costing less recently, it's a good time to consider a new loan! A refinanced mortgage may be worth its cost several times over, considering the benefits that it brings, as well as a reduced interest rate.
When you refinance, you may have the ability to reduce the interest rate and monthly payment , sometimes considerably. You also might have the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage loan, enabling you to build up your equity quicker.
Expenses and Fees
Of course, you will have some fees and expenses during your the refinance process. With your refinance, you're paying for basically the same things you were charged for when you obtained your current mortgage loan. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might need to pay points (prepaid interest) to gain a lower rate of interest. When you pay (on average) three percent of the loan amount up front, the savings for the life of the new mortgage can be significant. You may hear that these points may be deducted on your income taxes, but since tax regulations can be ever-changing, please speak with a tax professional before considering this in your calculations.
Another thing about taxes is that once your interest rate is reduced, naturally you'll also be lowering the interest amount that you'll be able to deduct from your taxes. This is another expense that some borrowers take into consideration. Call us at 305-967-7200 to help you do the math.
In the end, for most borrowers the amount of up-front costs to refinance are paid back very quickly in savings each month. We can help you find out 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 available cash. Call us at 305-967-7200 to get you started.
Curious about refinancing your home? Call us: 305-967-7200.