Weighing the Options of Refinancing
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Ever hear the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points under your current rate? Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing your mortgage loan has various advantages that often make it worth the up-front expenditure a few times over.
Benefits
You may be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with your refinanced loan. You might also have the option to "cash out" a portion of the built-up equity in your home, which you are able use to consolidate debts, add on to your home, or finance a vacation. With reduced interest rates, you may also be able to build up home equity faster by switching to a shorter term loan.
Fees and Expenses
As you probably expect, you will have some fees and expenses during your process of refinancing. When you refinance, you are paying for basically the same things you were charged for during your current mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might investigate paying points to receive a reduced interest rate. Your savings on the life of the mortgage loan might be significant if you've paid up front about 3% of the new loan balance. You might be told that the points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to speak with a tax professional before considering this in your calculations.
Speaking of taxes, if your interest rate is lowered, it follows that you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that borrowers take into account. Call us at 832-407-2668 to help you do the math.
All things considered, for most people the total of initial costs to refinance will be paid back soon in savings each month. We can help you find out what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at 832-407-2668 to get you started.
Want to know more about refinancing? Call us at 832-407-2668.