Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least two points below your present one? Perhaps that was good advice several years ago, but since refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing has a variety of advantages that can make it worth the initial cost a few times over.
You could be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with a refinanced mortgage loan. Additionally, you could be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also be able to build your home equity faster by moving to a shorter term loan.
Fees and Expenses
Of course, you will have to pay for the the refinance process. With your refinance, you are paying for basically the same things you paid for at the time you obtained your original mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might offer to pay points (prepaid interest) to get a lower interest rate. When you pay (on average) 3% of the loan amount at the start, your savings for the life of the refinanced loan can be great. Please talk to a tax professional before acting on advice that the points paid can be deducted on your federal income taxes.
Another thing about taxes is that when you bring down your interest rate, of course you will also be lowering the paid interest amount that you will be able to deduct from your taxes. This is another expense that borrowers take into account. Call us at (303) 862-7760 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the up-front cost of refinancing. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (303) 862-7760 to get you started.
Curious about refinancing your home? Give us a call: (303) 862-7760.