Weighing the Options of Refinancing
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Ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least two points lower than your current one? That may have been good advice a while back, but with refinancing dropping in cost recently, it's a good time to explore the options of a new loan! Refinancing your mortgage loan has some advantages that will often make it worth the initial cost many times over.
Advantages
When you refinance, you may have the ability to lower your interest rate and monthly payment , sometimes significantly. You may also have the ability to "cash out" some of the built-up equity in your residence, which you may use to take care of higher interest debt, improve your home, or plan a vacation. With reduced rates, you might also be able to build up home equity faster by moving to a shorter term mortgage loan.
The Cost
As you probably expect, you will have to pay for the the refinance process. You will have the same types of expenses and fees as you did with your existing mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might need to pay points (prepaid interest) to attain a better interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the refinanced loan can be great. Please consult a tax professional before acting on hear-say that these points paid may be deducted on your taxes.
Speaking of taxes, if your interest rate is lowered, naturally you will also be lowering the interest amount that you may deduct from your federal income taxes. This is another cost that borrowers consider. We can help you do the math! Call us at (281) 778-0805.
Most borrowers find that the monthly savings quickly outweigh the initial cost of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your cash on hand. Call us at (281) 778-0805 to get started.
Want to know more about refinancing your home? Give us a call: (281) 778-0805.