Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points lower than your existing one? Maybe several years ago that was good advice, but since refinance costs have been getting lower, it may be time to take a serious look. Refinancing has various advantages that will often make it worth the up-front expenditure many times over.
Advantages of Refinancing
You could be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced loan. You may also have the option to "cash out" some of the built-up equity in your residence, that you will be able use to consolidate debts, improve your home, or plan a vacation. You might have the option to refinance to a shorter-term mortgage, enabling you to build up your equity faster.
Of course, you will have to pay for your the refinance process. You'll be charged the same sort of expenses and fees as with your existing mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might consider paying points to be given a better interest rate. When you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the refinanced loan can be substantial. You may hear that points can be deducted on your income taxes, but as tax regulations can be ever-changing, we urge you to speak with your tax professional before considering this in your calculations.
Another thing about taxes is that when your interest rate is lowered, of course you'll also be lowering the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that some borrowers take into account. Call us at 425-508-9988 to help you do the math.
In the end, for most borrowers the total of up-front costs to refinance will be made up very quickly in monthly savings. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, if 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 you started.
Curious about refinancing? Call us: 425-508-9988.
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