Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate is at least 2 points below your existing one? Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it could be a good time to look into it. Refinancing your mortgage has a variety of advantages that can make it worth the initial cost many times over.
Advantages
You may be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage. You might also be able to "cash out" some of your home equity, that you will be able use to take care of higher interest debts, add on to your home, or finance a vacation. With reduced rates, you might also be able to build up home equity more quickly by changing to a shorter-term loan.
Fees and Expenses
All of these advantages do come with some expense, though. With your refinance, you are paying for basically the same things you paid for when you obtained your existing mortgage loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You might investigate paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount up front, the savings for the term of the refinanced mortgage loan can be significant. We recommend that you talk to a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.
Another thing about taxes is that once your interest rate is lowered, naturally you will also be lowering the interest amount that you may deduct from your taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at (808) 935-0678.
Ultimately, for most borrowers the amount of up-front costs to refinance will be made up very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your cash on hand. Call us at (808) 935-0678 to get started.
Curious about refinancing your home? Give us a call: (808) 935-0678.