Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least two points under your current one? Maybe that was good advice a number of years ago, but since refinance costs have been falling recently, it may be time to take a serious look. A refinance is often worth its cost many times over, considering the advantages that it brings, along with a lower interest rate.
Benefits from Refinancing
You might be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You also might have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also be able to build up home equity faster by switching to a shorter-term loan.
Expenses and Fees
All of these benefits do cost something, though. With your refinance, you are paying for basically the same things you paid for during your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might think about paying points to get a reduced interest rate. Your savings on the life of the mortgage may be significant if you've paid up front about three percent of the new loan total. We recommend that you consult with a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.
Another thing about taxes is that if you lower your interest rate, naturally you will also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is another expense that some borrowers consider. Call us at (281) 778-0805 to help you do the math.
Most borrowers find that the monthly savings quickly outweigh the up-front expenses of refinancing. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (281) 778-0805 to get you started.
Curious about refinancing? Give us a call at (281) 778-0805.