Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points under your present rate? Perhaps that was good advice a number of years ago, but since refinance costs have been falling recently, it may be time to look into it. A refinance may be worth its cost several times over, factoring in the advantages that come, as well as a lower interest rate.
You might be able to bring down your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced mortgage. Additionally, you could be given the option of tapping into the equity in your home by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter term mortgage.
Fees and Expenses
Of course, you will have some fees and expenses during the process of refinancing. You will have the same sort of expenses and fees as you did with your present home loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You might need to pay discount points (prepaid interest) to get a better interest rate. The amount you'll save on the life of the mortgage loan might be significant if you've paid up front about three percent of the new loan total. We recommend that you consult a tax professional before acting on advice that the paid points can be deducted on your taxes.
Speaking of taxes, when your interest rate is lowered, it follows that you'll also be lowering the paid interest amount that you may deduct on your federal income taxes. This is one more expense that some borrowers take into consideration. Call us at 512-302-9410 to help you do the math.
Most borrowers find that the savings each month balance out the initial expenses of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at 512-302-9410 to get started.
Curious about refinancing? Call us at 512-302-9410.
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