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 present one? That could have been good advice a while back, but with refinancing dropping in cost over the last few years, it's a good time to think about a new mortgage loan! Refinancing your mortgage loan has a variety of advantages that will often make it worth the up-front expenditure several times over.
Benefits
You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced mortgage. You might also be able to "cash out" some of your home equity, which you may use to consolidate debts, add on to your home, or take a vacation. You could have the option to refinance into a shorter-term mortgage, enabling you to build up your equity faster.
The Cost
Of course, you'll have to pay for the process of refinancing. When you refinance, you are paying for basically the same things you paid for during your existing mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can help you attain a lower interest rate. The amount you will save over the life of the mortgage loan might be significant if you've paid up front about three percent of the new loan total. You might hear that the points can be deducted on your income taxes, but since tax regulations are ever-changing, we urge you to consult a tax professional before depending on this.
Another cost that borrowers may consider is that a reduced interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at 732-643-0200 to help you do the math.
In the end, for most borrowers the total of up-front costs to refinance are made up very quickly in savings each month. We'll help you determine which mortgage loan program is the best fit for you, looking at your cash on hand, how likely you are to sell your residence in the near future, and what effect refinancing will have on your taxes. Call us at 732-643-0200 to get started.
Want to know more about refinancing your home? Call us at 732-643-0200.
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