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 is at least 2 points lower than your present one? That may have been accurate years ago, but with refinancing dropping in cost recently, it is a good time to consider a new mortgage! Refinancing has some benefits that can make it worth the initial expenditure a few times over.
Advantages
You could be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced mortgage. You could also be able to "cash out" some of your home equity, that you may use to take care of higher interest debts, improve your home, or finance a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by switching to a shorter term loan.
The Cost
All of these advantages do come with some expense, though. You will pay the same sort of expenses and fees as with your present mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might think about paying points to receive a better interest rate. Your savings on the life of the mortgage loan could be substantial if you've paid up front about three percent of the new loan balance. You might have heard that points may be tax deductible, but because tax regulations are difficult to keep up with, we urge you to consult your tax professional before depending on this.
Another thing about taxes is that when you lower your interest rate, naturally you'll also be reducing the interest amount that you will be able to deduct from your taxes. This is one more expense that some borrowers take into consideration. Call us at (808) 935-0678 to help you do the math.
Ultimately, for most the amount of up-front costs to refinance will be paid back very quickly in monthly savings. We will work with you to find out which mortgage program is best for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and what effect refinancing may have on your taxes. Call us at (808) 935-0678 to get started.
Want to know more about refinancing your home? Give us a call: (808) 935-0678.