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 2 points below your present one? Maybe several years ago that was wise advice, but since refinance costs have been getting lower, it may be time to take a serious look. A refinance is often worth its cost several times over, considering the benefits that it brings, as well as a reduced interest rate.
You could be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with a refinanced loan. You may also have the option to "cash out" a portion of your equity, that you may use to consolidate debts, add on to your home, or finance a vacation. With reduced rates, you might also get the chance to build your home equity faster by changing to a shorter term mortgage.
All these benefits do cost something, though. You will be charged the same kinds of expenses and fees as with your current mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might look into paying points to be given a reduced interest rate. When you pay (on average) three percent of the mortgage loan amount up front, your savings for the life of the new mortgage loan can be significant. You may hear that the points can be tax deductible, but since tax regulations are ever-changing, please speak with a tax professional before making any decisions based on this.
Speaking of taxes, when your interest rate is lowered, of course you'll also be reducing the paid interest amount that you will be able to deduct from your federal income taxes. This is another cost that some borrowers take into consideration. Call us at 504-866-5626 to help you do the math.
Most borrowers find that the monthly savings outweigh the initial expenses of a refinance. We can help you find out 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 cash on hand. Call us at 504-866-5626 to get started.
Curious about refinancing? Give us a call at 504-866-5626.