Weighing the Options of Refinancing
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Some have said that only if your new interest is at least 2 points lower, should you refinance your loan. That may have been good advice years ago, but with the fact that refinancing has been costing less in recent years, it's a good time to explore the options of a new mortgage! Refinancing your loan has various benefits that will often make it worth the up-front expenditure many times over.
Advantages
When you refinance, you may be able to reduce your interest rate and monthly payment , sometimes by a lot. You also may be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage loan, enabling you to add to your equity quicker.
The Cost
As you probably expect, you'll have some fees and expenses during the process of refinancing. When you refinance, you are paying for most of the same things you were charged for when you got your original mortgage loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could need to pay discount points (prepaid interest) to get a lower rate of interest. The money you'll save over the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on advice that these points paid can be deducted on your taxes.
Another thing about taxes is that when you bring down your interest rate, it follows that you'll also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is another expense that borrowers take into consideration. Call us at (860) 388-9814 to help you do the math.
Most borrowers find that the monthly savings balance out the initial expenses of a refinance. We will help you figure out what mortgage program is right for you, considering your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing may have on your taxes. Call us at (860) 388-9814 to get you started.
Want to know more about refinancing your home? Call us at (860) 388-9814.
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