Weighing the Options of Refinancing
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Some have said that only in the case your new interest will be at least 2 points below your current rate, should you refinance your loan. Perhaps that was good advice several years ago, but as refinance costs have been getting lower, it could be time to look into it. A refinanced mortgage can be worth its cost several times over, considering the benefits that it brings, in addition to a reduced interest rate.
Advantages
You could be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced loan. Additionally, you could have the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage, enabling you to build up your equity faster.
The Cost
All of these benefits do cost something, though. When you refinance, you are paying for basically the same things you were charged for during your original mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You could need to pay discount points (prepaid interest) to gain a lower rate of interest. If you pay (on average) 3% of the loan amount at the start, the savings for the term of the refinanced mortgage can be great. Please consult with a tax professional before acting on rumors that these points paid may be deducted on your taxes.
Another cost that a borrower might take into account is that a lower rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. Call us at 703-385-6122 #236 to help you do the math.
All things considered, for most people the amount of initial costs to refinance will be made up very quickly in monthly savings. 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 money on hand. Call us at 703-385-6122 #236 to get started.
Want to know more about refinancing? Call us: 703-385-6122 #236.
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