Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least 2 points lower than your current one? That might have been true a while back, but with refinancing dropping in cost over the last few years, it is a good time to explore the options of a new mortgage! A refinance is often worth its cost many times over, factoring in the benefits that come, in addition to a lower interest rate.
Benefits from Refinancing
When you refinance, you may have the ability to lower your interest rate and mortgage payment amount, perhaps significantly. Additionally, you might have the option of tapping into your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. With reduced rates, you might also be able to build your home equity more quickly by changing to a shorter-term loan.
Expenses and Fees
All these benefits do come with some expense, though. You'll be charged the same types of fees as with your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can result in a better interest rate. The amount you will save over the life of the mortgage may be significant if you have paid up front about three percent of the new loan balance. We recommend that you consult with a tax professional before acting on hear-say that these paid points can be deducted on your federal income taxes.
Another thing about taxes is that if you bring down your interest rate, it follows that you will also be lowering the paid interest amount that you can deduct on your taxes. This is another cost that some borrowers take into consideration. Call us at 603-893-6616 to help you do the math.
Most people find that the savings per month outweigh the up-front expenses of refinancing. We can help you find out what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 603-893-6616 to get you started.
Want to know more about refinancing? Give us a call at 603-893-6616.