Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points below your current rate? Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it may be time to take a serious look. Refinancing has a variety of advantages that can make it worth the up-front cost several times over.
When you refinance, you might have the ability to reduce your interest rate and monthly mortgage payment , sometimes considerably. You may also be able to "cash out" some of the built-up equity in your residence, that you can use to take care of higher interest debts, improve your home, or plan a vacation. With lower interest rates, you may also get the chance to build up home equity more quickly by switching to a shorter-term mortgage loan.
Expenses and Fees
All of these advantages do come with some expense, though. You will have the same kinds of expenses and fees as you did with your current mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could offer to pay discount points (prepaid interest) to gain a more favorable rate of interest. When you pay (on average) 3% of the loan amount up front, your savings for the term of the refinanced mortgage can be substantial. You may have heard that these points can be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to consult with a tax professional before depending on this.
Speaking of taxes, when your interest rate is reduced, naturally you'll also be reducing the paid interest amount that you will be able to deduct from your federal income taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at (303) 228-2254.
In the end, for most borrowers the amount of initial costs to refinance are paid back very quickly in savings each month. We will work with you to find out which mortgage loan program is ideal for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and how refinancing may effect your taxes. Call us at (303) 228-2254 to get started.
Curious about refinancing? Call us: (303) 228-2254.