Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate will be at least 2 points under your existing rate? Perhaps that was good advice a number of years ago, but since refinance costs have been falling recently, it could be a good time to take a serious look. A refinance can be worth its cost many times over, considering the advantages that can come, as well as a reduced interest rate.
When you refinance, you could have the ability to reduce the interest rate and mortgage payment , perhaps by a lot. Additionally, you could be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also get the chance to build your home equity faster by switching to a shorter term mortgage loan.
Fees and Expenses
All these benefits do come with some expense, though. With your refinance, you are paying for a lot of the same things you paid for during your current mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You could need to pay discount points (prepaid interest) to get a more favorable interest rate. If you pay (on average) three percent of the loan amount at the start, the savings for the life of the refinanced mortgage can be significant. We recommend that you consult a tax professional before acting on rumors that the points paid may be deducted on your taxes.
Another thing about taxes is that once you lower your interest rate, naturally you will also be lowering the interest amount that you'll be able to deduct on your federal income taxes. This is another expense that some borrowers consider. Call us at (321) 777-7277 to help you do the math.
In the end, for most people the amount of initial costs to refinance will be paid back soon in savings each month. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your money on hand. Call us at (321) 777-7277 to get you started.
Want to know more about refinancing your home? Give us a call: (321) 777-7277.