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 2 points under your current rate, should you refinance your mortgage. That may have been true years ago, but since refinancing has been costing less over the last few years, it's a good time to explore the options of a new mortgage loan! Refinancing your loan has a number of advantages that will often make it worth the up-front expenditure several times over.
You could be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced loan. Additionally, you might have the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter term mortgage.
As you probably know, you'll have to pay for your process of refinancing. You will have to pay the same types of expenses and fees as with your present mortgage. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You could need to pay discount points (prepaid interest) to gain a better interest rate. When you pay (on average) three percent of the mortgage loan amount up front, your savings for the term of the new mortgage loan can be significant. You may hear that points can be tax deductible, but since tax regulations can be ever-changing, please speak with your tax professional before considering this in your calculations.
An additional cost that a borrower may take into account is that a lower rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. Call us at (816) 525-8000 to help you do the math.
Most people find that the monthly savings quickly outweigh the up-front expenses of refinancing. We will work with you to determine which loan program is right for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing might effect your taxes. Call us at (816) 525-8000 to get you started.
Want to know more about refinancing? Call us: (816) 525-8000.
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