When To Refinance
Weighing the Options of Refinancing
The old rule was that a refinance was a good idea only when your new interest rate is at least 2 points under your current rate. Perhaps several years ago that was correct, but as refinance costs have been getting lower, it could be a good time to look into it. A refinanced mortgage can be worth its cost several times over.
Advantages
When you refinance, you might have the ability to lower your interest rate and monthly mortgage payment amount, sometimes by a lot. Additionally, you could have the option of tapping into the equity in your house by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to build up your home equity quicker.
Expenses and Fees
All these advantages do come with some expense, though. With your refinance, you are paying for many of the same things you paid for during your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You might need to pay points (prepaid interest) to attain a better interest rate. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the refinanced mortgage loan can be substantial. Please consult a tax professional before acting on hear-say that these paid points can be deducted on your taxes.
Another thing about taxes is that once your interest rate is reduced, naturally you will also be reducing the interest amount that you will be able to deduct on your taxes. This is one more expense that some borrowers take into consideration. Call us at 845-352-0722 to help you do the math.
All things considered, most of the total up front costs to refinance will be paid back soon in monthly savings. We can help you explore your options, consider the effect a refinance might have on your taxes, determine whether you are likely to sell your home in the next couple of years, and figure out your available cash. Call us at 845-352-0722 to get started.