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 under your current rate, should you refinance your loan. That might have been accurate years ago, but with the fact that refinancing has been costing less recently, it is never the wrong time to explore the options of a new mortgage loan! A refinance can be worth its cost many times over, factoring in the benefits that can come, in addition to a reduced interest rate.
When you refinance, you may have the ability to lower the interest rate and mortgage payment amount, sometimes by a lot. You might also have the option to "cash out" a portion of the built-up equity in your home, which you can use to take care of higher interest debt, improve your home, or finance a vacation. With lower interest rates, you may also get the chance to build up home equity faster by moving to a shorter term mortgage loan.
Expenses and Fees
As you probably know, you will have to pay for the the refinance process. When you refinance, you are paying for basically the same things you were charged for during your original mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can get you a better interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the term of the new mortgage loan can be substantial. You may hear that points can be deducted on your income taxes, but since tax regulations are ever-changing, we urge you to speak with a tax professional before considering this in your calculations.
Speaking of taxes, when your interest rate is lowered, of course you will also be reducing the paid interest amount that you can deduct on your federal income taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at (281) 778-0805.
Most borrowers find that the monthly savings quickly balance out the up-front cost of refinancing. We'll help you figure out which loan program is perfect for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing could have on your taxes. Call us at (281) 778-0805 to get you started.
Curious about refinancing your home? Give us a call at (281) 778-0805.