Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points under your current rate? Maybe that was sound advice a number of years ago, but as refinance costs have been falling recently, it may be time to look into it. Refinancing your mortgage loan has a number of benefits that often make it worth the initial cost many times over.
You might be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage. You could also have the option to "cash out" a portion of your equity, which you can use to consolidate debt, make home improvements, or finance a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by moving to a shorter term mortgage.
Expenses and Fees
All these benefits do come with some expense, though. You will be charged the same types of fees as you did with your current mortgage. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might think about paying points to receive a lower interest rate. Your savings over the life of the loan could be substantial if you've paid up front about 3% of the new loan total. You may be told that these points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please consult a tax professional before making any decisions based on this.
Another thing about taxes is that when you lower your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that some borrowers consider. We can help you do the math! Call us at (513) 713-1515.
Most borrowers find that the savings each month balance out the up-front cost of refinancing. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (513) 713-1515 to get you started.
Want to know more about refinancing your home? Give us a call: (513) 713-1515.