Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least 2 points under your current one? That may have been true a while back, but since refinancing has been costing less over the last few years, it's a good time to explore the options of a new loan! Refinancing your mortgage loan has some advantages that can make it worth the initial cost many times over.
When you refinance, you might be able to lower your interest rate and mortgage payment , perhaps considerably. You might also have the option to "cash out" a portion of the built-up equity in your home, which you are able use to take care of higher interest debts, make home improvements, or finance a vacation. With lower rates, you might also get the chance to build up home equity faster by changing to a shorter-term mortgage.
Fees and Expenses
All of these advantages do come with some expense, though. When you refinance, you are paying for basically the same things you were charged for when you got your existing mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can help you get a better interest rate. If you pay (on average) three percent of the loan amount initially, your savings for the term of the refinanced mortgage can be substantial. You may have heard that points can be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult with a tax professional before depending on this.
One more expense that a borrower might consider is that a reduced rate of interest will lower the interest amount you will deduct on your taxes. Call us at 425-508-9988 to help you do the math.
Most borrowers find that the monthly savings balance out the up-front cost of refinancing. We can help you explore your options, considering the effect a refinance might 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 425-508-9988 to get started.
Want to know more about refinancing? Call us: 425-508-9988.
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