Weighing the Options of Refinancing
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It has been said that only when your new interest is at least two points lower, should you refinance your mortgage. That may have been sound advice years ago, but with refinancing dropping in cost recently, it is a good time to consider a new mortgage loan! Refinancing has a variety of benefits that often make it worth the initial cost several times over.
Advantages of Refinancing
You might be able to lower your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage loan. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance into a shorter-term mortgage program, enabling you to build up your home equity faster.
Fees and Expenses
All these advantages do cost something, though. When you refinance, you're paying for basically the same things you paid for at the time you got your existing mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
You could offer to pay discount points (prepaid interest) to get a more favorable rate of interest. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the refinanced mortgage loan can be significant. We recommend that you consult with a tax professional before acting on hear-say that these paid points may be deducted on your taxes.
Speaking of taxes, when your interest rate is lowered, of course you'll also be lowering the interest amount that you can deduct from your federal income taxes. This is another expense that some borrowers take into account. Call us at (904) 342-3622 to help you do the math.
Ultimately, for most the total of up-front costs to refinance will be paid back soon in monthly savings. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (904) 342-3622 to get you started.
Curious about refinancing? Call us: (904) 342-3622.