Weighing the Options of Refinancing
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Some have said that only in the case your new interest is at least two points lower, should you refinance your mortgage. That might have been valid a while back, but as refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! A refinanced mortgage loan is often worth its cost many times over, factoring in the advantages that may come, along with a reduced interest rate.
Advantages
You may be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced mortgage. You might also have the ability to "cash out" some of the built-up equity in your home, which you are able use to take care of higher interest debt, improve your home, or take a vacation. With lower interest rates, you might also get the chance to build your home equity more quickly by switching to a shorter term mortgage loan.
The Cost
Of course, you will have to pay for the process of refinancing. When you refinance, you are paying for many of the same things you were charged for during your original mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could offer to pay points (prepaid interest) to attain a more favorable interest rate. Your savings on the life of the mortgage loan might be substantial if you have paid up front about three percent of the new loan total. You may hear that the points can be tax deductible, but because tax regulations can be difficult to keep up with, please speak with a tax professional before depending on this.
An additional cost that a borrower may consider is that a lower interest rate will lower the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at 425-508-9988.
Most borrowers find that the monthly savings balance out the initial expenses of refinancing. We will work with you to determine which program is right for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing will effect your taxes. Call us at 425-508-9988 to get you started.
Curious about refinancing? Call us: 425-508-9988.