Weighing the Options of Refinancing
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It has been said that only when your new interest is at least two points under your current rate, should you refinance your loan. Perhaps that was sound advice a number of years ago, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinance may be worth its cost several times over, considering the advantages that can come, along with a reduced interest rate.
Advantages of Refinancing
When you refinance, you could be able to lower your interest rate and mortgage payment amount, perhaps significantly. You might also be able to "cash out" a portion of the built-up equity in your home, that you may use to consolidate debts, improve your home, or finance a vacation. With reduced rates, you may also be able to build up home equity faster by changing to a shorter-term mortgage.
Expenses and Fees
All these advantages do come with some expense, though. You'll be charged the same kinds of expenses and fees as you did with your present home loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could offer to pay points (prepaid interest) to gain a better interest rate. Your savings over the life of the mortgage may be substantial if you have paid up front about three percent of the new loan balance. You might be told that the points can be deducted on your income taxes, but since tax regulations can be difficult to keep up with, we urge you to consult with a tax professional before making any decisions based on this.
Speaking of taxes, if you bring down your interest rate, naturally you'll also be reducing the interest amount that you may deduct on your federal income taxes. This is another cost that some borrowers consider. Call us at (727) 478-2797 to help you do the math.
Most borrowers find that the savings each month balance out the initial cost of a refinance. We can help you find out your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (727) 478-2797 to get you started.
Want to know more about refinancing your home? Give us a call: (727) 478-2797.