Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least 2 points under your present one? Maybe several years ago that was good advice, but since refinance costs have been getting lower, it may be time to look into it. A refinanced mortgage is often worth its cost many times over, because of the advantages that may come, as well as a reduced interest rate.
Benefits from Refinancing
When you refinance, you could have the ability to reduce your interest rate and monthly payment , perhaps by a lot. You also may have the option of pulling out some of your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build up home equity faster by moving to a shorter-term mortgage loan.
All of these advantages do cost something, though. You will have to pay the same types of fees as you did with your present mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Do the Math
You could need to pay discount points (prepaid interest) to attain a lower rate of interest. If you pay (on average) 3% of the loan amount at the start, the savings for the life of the new loan can be substantial. Please consult a tax professional before acting on rumors that any points paid can be deducted on your federal income taxes.
An additional cost that a borrower may take into account is that a lower rate of interest will lower the interest amount you will be able to deduct on your federal income taxes. Call us at 954.920.9799 to help you do the math.
Ultimately, for most people the total of up-front costs to refinance are paid back soon in monthly savings. We will help you find out which program is the right fit for you, considering your cash on hand, the likelihood of selling your home in the near future, and what effect refinancing might have on your taxes. Call us at 954.920.9799 to get started.
Want to know more about refinancing your home? Give us a call: 954.920.9799.