Weighing the Options of Refinancing
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It has been said that only in the case your new interest will be at least two points lower, should you refinance your loan. Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it could be time to look into it. Refinancing your loan has a number of advantages that can make it worth the initial expenditure a few times over.
When you refinance, you may be able to reduce your interest rate and monthly mortgage payment , sometimes significantly. You could also have the option to "cash out" a portion of the built-up equity in your home, that you will be able use to consolidate debt, add on to your home, or finance a vacation. You may be able to refinance into a shorter-term mortgage, enabling you to add to your equity faster.
Expenses and Fees
Of course, you will have some fees and expenses during your process of refinancing. You'll have the same sort of fees as you did with your present mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You could need to pay discount points (prepaid interest) to get a more favorable interest rate. When you pay (on average) 3% of the loan amount up front, the savings for the life of the new loan can be great. You may hear that points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, please speak with your tax professional before considering this in your calculations.
One more expense that a borrower may consider is that a lower rate of interest will lower the interest amount you will be able to deduct from your taxes. Call us at (281) 778-0805 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the up-front expenses of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (281) 778-0805 to get started.
Curious about refinancing? Call us: (281) 778-0805.