Weighing the Options of Refinancing
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Some have said that only when your new interest will be at least two points lower, should you refinance your loan. That could have been accurate years ago, but since refinancing has been costing less over the last few years, it's never the wrong time to explore the options of a new loan! A refinanced loan can be worth its cost many times over, factoring in the benefits that it brings, as well as a lower interest rate.
When you refinance, you could be able to lower the interest rate and monthly payment , sometimes significantly. You could also have the ability to "cash out" some of the built-up equity in your home, which you will be able use to consolidate debt, make home improvements, or finance a vacation. You might be able to refinance to a shorter-term mortgage program, giving you the ability to add to your home equity quicker.
Fees and Expenses
All these benefits do cost something, though. You will have to pay the same kinds of fees as with your existing home loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can result in a lower interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, the savings for the life of the new loan can be significant. Please consult with a tax professional before acting on hear-say that these paid points can be deducted on your federal income taxes.
Speaking of taxes, when your interest rate is reduced, of course you'll also be reducing the paid interest amount that you will be able to deduct on your federal income taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at 718-441-7000.
All things considered, for most the total of up-front costs to refinance will be made up soon in monthly savings. We can help you find out your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 718-441-7000 to get you started.
Curious about refinancing your home? Give us a call at 718-441-7000.