Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least 2 points under your current rate? That might have been true years ago, but with refinancing dropping in cost over the last few years, it's never the wrong time to think about a new mortgage loan! Refinancing has some advantages that will often make it worth the up-front expenditure several times over.
When you refinance, you could have the ability to reduce your interest rate and mortgage payment , perhaps considerably. Additionally, you might have the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With reduced rates, you may also get the chance to build your home equity faster by moving to a shorter-term mortgage loan.
All these advantages do come with some expense, though. You will have the same types of expenses and fees as with your present mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
When you refinance your present loan too quickly, you may have a penalty to pay. That depends on the rules of your present mortgage. Some of the penalties just apply to the first couple of years. We'll help you figure it out: contact us at 866-300-1550.
Do the Math
Paying points can result in a lower interest rate. The amount you will save over the life of the mortgage loan could be significant if you've paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on advice that any points paid can be deducted on your taxes.
Another thing about taxes is that if your interest rate is lowered, it follows that you will also be reducing the interest amount that you can deduct on your taxes. This is one more expense that some borrowers take into consideration. We can help you do the math! Call us at 866-300-1550.
All things considered, for most people the total of up-front costs to refinance are paid back very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 866-300-1550 to get you started.
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