Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that states you should only refinance if the new interest rate will be at least 2 points under your existing rate? That may have been valid years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to consider a new loan! Refinancing your mortgage loan has some benefits that often make it worth the initial expenditure a few times over.
You could be able to lower your interest rate (sometimes significantly) and make smaller monthly payments with your refinanced mortgage loan. Additionally, you might be given the option of pulling out some of the equity in your house by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With reduced rates, you may also get the chance to build up home equity more quickly by switching to a shorter-term loan.
Fees and Expenses
All these advantages do cost something, though. You will pay the same types of expenses and fees as you did with your existing home loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Do the Math
You could need to pay discount points (prepaid interest) to attain a more favorable rate of interest. If you pay (on average) three percent of the loan amount initially, your savings for the life of the new mortgage can be substantial. We recommend that you talk to a tax professional before acting on rumors that any points paid can be deducted on your federal income taxes.
An additional expense that borrowers may consider is that a lower interest rate will lower the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at 703-288-0777.
Most people find that the savings each month quickly outweigh the up-front cost of a refinance. We can help you find out what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at 703-288-0777 to get started.
Want to know more about refinancing? Call us: 703-288-0777.
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