Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least 2 points lower than your present one? That may have been accurate years ago, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage loan! Refinancing your mortgage loan has some advantages that often make it worth the initial expenditure several times over.
When you refinance, you may be able to lower the interest rate and monthly payment amount, sometimes considerably. You also might be given the option of pulling out some of the equity in your home by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage, giving you the ability to build your equity quicker.
Expenses and Fees
All these advantages do come with some expense, though. You will be charged the same kinds of expenses and fees as with your existing home loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could need to pay points (prepaid interest) to get a more favorable rate of interest. Your savings over the life of the mortgage loan might be significant if you've paid up front about three percent of the new loan balance. We recommend that you talk to a tax professional before acting on hear-say that these paid points can be deducted on your federal income taxes.
Speaking of taxes, once you bring down your interest rate, it follows that you will also be reducing the interest amount that you may deduct from your federal income taxes. This is one more cost that borrowers take into consideration. Call us at (972) 292-0448 to help you do the math.
Ultimately, for most people the total of up-front costs to refinance will be made up very quickly in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your cash on hand. Call us at (972) 292-0448 to get you started.
Curious about refinancing your home? Give us a call at (972) 292-0448.