Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only refinance if the new interest rate is at least 2 points lower than your present one? That could have been true years ago, but with the fact that refinancing has been costing less in recent years, it's never the wrong time to think about a new mortgage loan! Refinancing has some benefits that can make it worth the up-front cost a few times over.
Advantages of Refinancing
When you refinance, you may be able to reduce your interest rate and monthly payment , sometimes by a lot. You also might have the option of pulling out some of the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by changing to a shorter term loan.
Fees and Expenses
All these advantages do cost something, though. When you refinance, you are paying for many of the same things you were charged for at the time you got your current mortgage. These could include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might think about paying points to be given a lower interest rate. The amount you'll save on the life of the loan could be substantial if you've paid up front about three percent of the new loan balance. Please consult a tax professional before acting on rumors that these points paid can be deducted on your federal income taxes.
Another expense that a borrower may take into account is that a reduced interest rate will lower the interest amount you'll be able to deduct on your federal income taxes. We can help you do the math! Call us at (401) 583-4150.
In the end, for most borrowers the total of up-front costs to refinance will be made up soon in savings each month. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your money on hand. Call us at (401) 583-4150 to get you started.
Curious about refinancing your home? Call us: (401) 583-4150.