Weighing the Options of Refinancing
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It has been said that only in the case your new interest will be at least two points under your current rate, should you refinance your mortgage. That might have been true years ago, but with refinancing dropping in cost recently, it is a good time to explore the options of a new mortgage loan! A refinanced loan is often worth its cost several times over, factoring in the advantages that come, along with a lower interest rate.
Benefits from Refinancing
When you refinance, you may be able to reduce your interest rate and monthly payment , sometimes considerably. You might also have the option to "cash out" some of your home equity, which you are able use to take care of higher interest debts, improve your home, or plan a vacation. With reduced interest rates, you may also be able to build up home equity faster by switching to a shorter-term loan.
Expenses and Fees
Of course, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for basically the same things you paid for when you got your original mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You could offer to pay discount points (prepaid interest) to attain a lower rate of interest. Your savings over the life of the mortgage might be substantial if you've paid up front about three percent of the new loan total. We recommend that you consult with a tax professional before acting on hear-say that any paid points may be deducted on your taxes.
Speaking of taxes, when you bring down your interest rate, of course you will also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is another expense that borrowers consider. Call us at (713) 667-5472 to help you do the math.
Ultimately, for most people the amount of up-front costs to refinance will be paid back soon in monthly savings. We'll help you figure out which mortgage program is right for you, considering your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing will have on your taxes. Call us at (713) 667-5472 to get you started.
Want to know more about refinancing your home? Give us a call at (713) 667-5472.