Weighing the Options of Refinancing
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It has been said that only in the case your new interest is at least 2 points under your current rate, should you refinance your loan. That might have been accurate a while back, but since refinancing has been costing less in recent years, it is a good time to consider a new mortgage loan! Refinancing has some advantages that can make it worth the up-front expenditure several times over.
When you refinance, you might be able to reduce the interest rate and mortgage payment , sometimes considerably. You also might be given the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you might also be able to build up home equity more quickly by moving to a shorter term loan.
Fees and Expenses
All of these advantages do come with some expense, though. You will be charged the same sort of expenses and fees as you did with your current home loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could need to pay points (prepaid interest) to get a better interest rate. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the life of the new loan can be substantial. We recommend that you consult a tax professional before acting on rumors that the points paid can be deducted on your taxes.
One more cost that borrowers might take into account is that a lower interest rate will lower 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 people find that the monthly savings outweigh the initial expenses of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at (440) 234-9660 to get started.
Want to know more about refinancing? Give us a call: (440) 234-9660.