Weighing the Options of Refinancing
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It has been said that only when your new interest will be at least two points lower, should you refinance your loan. Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it could be a good time to look into it. A refinance can be worth its cost many times over, factoring in the advantages that it brings, in addition to a lower interest rate.
You might be able to lower your interest rate (sometimes by a lot) and have smaller mortgage payments with your refinanced loan. You also could have the option of pulling out some of your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With lower rates, you might also get the chance to build your home equity faster by switching to a shorter term mortgage.
All these advantages do cost something, though. You'll have to pay the same kinds of fees as you did with your present mortgage loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might look into paying points to be given a better interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, your savings for the term of the new mortgage loan can be substantial. You may hear that these points may be tax deductible, but because tax regulations are difficult to keep up with, please consult your tax professional before considering this in your calculations.
One more cost that borrowers might take into account is that a lower interest rate will reduce the interest amount you'll deduct from your federal income taxes. Call us at 703-288-0777 to help you do the math.
Most people find that the savings each month outweigh the up-front cost of refinancing. We can help you explore your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 703-288-0777 to get you started.
Want to know more about refinancing? Call us: 703-288-0777.
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