Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points lower than your existing rate? That could have been valid a while back, but with refinancing dropping in cost recently, it is a good time to explore the options of a new loan! Refinancing your mortgage has a number of advantages that often make it worth the up-front cost many times over.
Advantages
You could be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with a refinanced mortgage. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also be able to build your home equity faster by moving to a shorter term loan.
The Cost
All these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for at the time you got your original mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might look into paying points to be given a better interest rate. Your savings over the life of the mortgage might be significant if you have paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on advice that any paid points may be deducted on your taxes.
An additional expense that a borrower might consider is that a reduced interest rate will lower the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at (941) 366-5800.
In the end, for most borrowers the total of up-front costs to refinance will be paid back soon in savings each month. We can help you explore your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (941) 366-5800 to get started.
Curious about refinancing your home? Call us at (941) 366-5800.