Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points below your current one? That might have been accurate years ago, but with refinancing dropping in cost recently, it is a good time to consider a new mortgage! A refinance may be worth its cost many times over, factoring in the benefits that it brings, as well as a lower interest rate.
Benefits from Refinancing
When you refinance, you may be able to lower the interest rate and monthly mortgage payment amount, sometimes considerably. You also may be given the option of tapping into the equity in your property by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you might also be able to build your home equity faster by switching to a shorter term mortgage.
Expenses and Fees
All these benefits do cost something, though. You will be charged the same sort of expenses and fees as you did with your existing home loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could offer to pay points (prepaid interest) to get a better rate of interest. Your savings over the life of the loan could be substantial if you have paid up front about 3% of the new loan total. You might hear that the points may be deducted on your income taxes, but since tax regulations can be ever-changing, we urge you to consult with a tax professional before considering this in your calculations.
One more expense that borrowers may take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct from your federal income taxes. Call us at (718) 477-4405 to help you do the math.
Most people find that the savings each month balance out the up-front expenses of refinancing. We'll help you figure out what mortgage loan program is right for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing might effect your taxes. Call us at (718) 477-4405 to get you started.
Curious about refinancing? Give us a call at (718) 477-4405.