Weighing the Options of Refinancing
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It has been said that only when your new interest will be at least two points below your current rate, should you refinance your loan. Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it may be time to look into it. Refinancing has various advantages that will often make it worth the initial expenditure several times over.
You may be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced mortgage. You might also have the ability to "cash out" some of the built-up equity in your residence, which you are able use to consolidate debt, add on to your home, or finance a vacation. You could have the option to refinance to a shorter-term mortgage program, giving you the ability to build up your equity faster.
Fees and Expenses
All of these advantages do come with some expense, though. With your refinance, you are paying for a lot of the same things you paid for during your existing mortgage loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
Paying discount points can help you attain a lower interest rate. The amount you'll save over the life of the mortgage might be significant if you have paid up front about 3% of the new loan balance. You may hear that the points can be deducted on your income taxes, but because tax regulations can be ever-changing, please consult with a tax professional before depending on this.
An additional cost that a borrower may consider is that a reduced interest rate will reduce the interest amount you'll be able to deduct from your federal income taxes. We can help you do the math! Call us at (440) 234-9660.
Most borrowers find that the monthly savings outweigh the initial expenses of refinancing. We can help you find out what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (440) 234-9660 to get started.
Curious about refinancing? Call us at (440) 234-9660.