Weighing the Options of Refinancing
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Ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate is at least two points under your current one? That may have been valid a while back, but with refinancing dropping in cost recently, it's a good time to consider a new loan! Refinancing has some benefits that will often make it worth the up-front expenditure several times over.
Benefits
When you refinance, you may be able to lower the interest rate and monthly payment amount, sometimes significantly. You could also be able to "cash out" some of the built-up equity in your residence, that you will be able use to consolidate debt, improve your home, or take a vacation. You could have the option to refinance to a shorter-term mortgage, giving you the ability to build up your home equity faster.
The Cost
All these advantages do come with some expense, though. With your refinance, you're paying for many of the same things you were charged for when you got your original mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might think about paying points to receive a better interest rate. The money you'll save over the life of the mortgage loan may be substantial if you've paid up front about 3% of the new loan balance. You might hear that the points may be deducted on your income taxes, but as tax regulations can be ever-changing, we urge you to speak with a tax professional before depending on this.
An additional expense that a borrower might consider is that a reduced rate of interest will lower the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at (817) 821-5179.
All things considered, for most borrowers the amount of initial costs to refinance are paid back very quickly in savings each month. We'll work with you to figure out which mortgage loan program is right for you, considering your cash on hand, the likelihood of selling your house in the near future, and the effect refinancing will probably have on your taxes. Call us at (817) 821-5179 to get you started.
Curious about refinancing? Give us a call: (817) 821-5179.
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