Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least two points lower than your present one? That might have been good advice years ago, but with refinancing dropping in cost over the last few years, it is a good time to consider a new mortgage! Refinancing has some benefits that often make it worth the up-front cost a few times over.
When you refinance, you might have the ability to lower the interest rate and monthly mortgage payment amount, sometimes considerably. You also could be given the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You might have the option to refinance to a shorter-term mortgage, enabling you to build up your equity faster.
Expenses and Fees
As you probably expect, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for basically the same things you paid for when you got your existing mortgage loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You could offer to pay discount points (prepaid interest) to get a lower rate of interest. The money you will save over the life of the loan could be significant if you've paid up front about three percent of the new loan total. You may be told that points can be tax deductible, but as tax regulations can be ever-changing, please consult a tax professional before considering this in your calculations.
Another thing about taxes is that if you bring down your interest rate, naturally you'll also be reducing the paid interest amount that you will be able to deduct on your federal income taxes. This is another expense that some borrowers consider. Call us at (949) 249-3067 to help you do the math.
Most borrowers find that the savings each month balance out the up-front expenses of refinancing. We will help you find out which mortgage program is best for you, considering your cash on hand, how likely you are to sell your house in the near future, and how refinancing may effect your taxes. Call us at (949) 249-3067 to get you started.
Want to know more about refinancing your home? Call us: (949) 249-3067.