Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate will be at least 2 points under your current rate? Perhaps several years ago that was sage advice, but since refinance costs have been falling recently, it could be a good time to take a serious look. A refinanced mortgage can be worth its cost several times over, because of the benefits that it brings, along with a reduced interest rate.
Benefits from Refinancing
When you refinance, you could have the ability to lower your interest rate and mortgage payment amount, perhaps considerably. You might also have the option to "cash out" a portion of the built-up equity in your home, which you will be able use to consolidate debts, make home improvements, or take a vacation. With reduced rates, you may also get the chance to build up home equity more quickly by moving to a shorter term mortgage.
Expenses and Fees
As you probably expect, you will have to pay for the process of refinancing. With your refinance, you're paying for a lot of the same things you were charged for during your original mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could offer to pay discount points (prepaid interest) to attain a lower interest rate. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the new mortgage can be great. You might be told that points may be deducted on your income taxes, but as tax regulations are difficult to keep up with, please consult a tax professional before making decisions based on this.
Another thing about taxes is that once your interest rate is lowered, it follows that you'll also be reducing the paid interest amount that you can deduct on your taxes. This is another cost that some borrowers consider. Call us at (281) 778-0805 to help you do the math.
Ultimately, for most the total of initial costs to refinance are paid back very quickly in monthly savings. We can help you figure out your options, considering the effect a refinance could 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 (281) 778-0805 to get you started.
Curious about refinancing? Give us a call: (281) 778-0805.