Weighing the Options of Refinancing
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It has been said that only when your new interest will be at least 2 points below your current rate, should you refinance your loan. That could have been sound advice years ago, but as refinancing has been costing less over the last few years, it is never the wrong time to consider a new mortgage loan! Refinancing has some benefits that can make it worth the initial cost several times over.
When you refinance, you could have the ability to reduce your interest rate and mortgage payment amount, sometimes significantly. You could also have the ability to "cash out" a portion of the built-up equity in your residence, that you can use to take care of higher interest debt, make home improvements, or finance a vacation. You could have the option to refinance into a shorter-term mortgage loan, enabling you to build up your equity quicker.
Expenses and Fees
All these benefits do come with some expense, though. When you refinance, you are paying for a lot of the same things you were charged for during your current mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can get you a better interest rate. Your savings over the life of the mortgage loan could be substantial if you have paid up front about 3% of the new loan total. Please talk to a tax professional before acting on advice that these points paid may be deducted on your federal income taxes.
One more cost that a borrower might consider is that a reduced interest rate will reduce the interest amount you'll be able to deduct from your taxes. Call us at (303) 228-2254 to help you do the math.
Most borrowers find that the monthly savings quickly outweigh the up-front expenses of a refinance. We can help you find out what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at (303) 228-2254 to get you started.
Curious about refinancing your home? Give us a call at (303) 228-2254.