Weighing the Options of Refinancing
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Some have said that only in the case your new interest will be at least two points lower, should you refinance your loan. Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it could be time to look into it. Refinancing has a number of benefits that can make it worth the up-front expenditure a few times over.
You could be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced mortgage. Additionally, you might have the option of tapping into 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 rates, you may also get the chance to build your home equity more quickly by switching to a shorter-term mortgage loan.
Fees and Expenses
All of these advantages do come with some expense, though. With your refinance, you are paying for most of the same things you were charged for during your original mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might look into paying points to reduce your interest rate. Your savings over the life of the loan might be substantial if you've paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on rumors that these paid points may be deducted on your taxes.
An additional cost that borrowers may take into account is that a reduced rate of interest will lower the interest amount you will be able to deduct from your taxes. Call us at (512) 731-8607 to help you do the math.
Ultimately, for most people the amount of up-front costs to refinance will be paid back very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (512) 731-8607 to get started.
Curious about refinancing? Give us a call: (512) 731-8607.