Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate will be at least 2 points under your present one? Maybe that was sound advice a number of years ago, but as refinance costs have been falling recently, it may be time to take a serious look. A refinanced mortgage can be worth its cost several times over, factoring in the benefits that may come, as well as a reduced interest rate.
Benefits from Refinancing
When you refinance, you could be able to lower the interest rate and monthly payment amount, perhaps significantly. Additionally, you might have the option of pulling out some of the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You might have the option to refinance to a shorter-term mortgage, enabling you to build up your equity faster.
Fees and Expenses
All these advantages do come with some expense, though. You will have to pay the same kinds of expenses and fees as with your existing mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can result in a lower interest rate. The money you'll save over the life of the mortgage could be significant if you have paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on advice that any points paid can be deducted on your federal income taxes.
An additional expense that borrowers might take into account is that a reduced interest rate will reduce the interest amount you'll be able to deduct on your taxes. Call us at (334) 285-8850 to help you do the math.
Ultimately, for most borrowers the amount of up-front costs to refinance will be paid back very quickly in savings each month. We will work with you to figure out what mortgage program is the ideal fit for you, looking at your cash on hand, the likelihood of selling your house in the near future, and the effect refinancing will have on your taxes. Call us at (334) 285-8850 to get started.
Curious about refinancing? Give us a call: (334) 285-8850.