Weighing the Options of Refinancing
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Some have said that only when your new interest is at least 2 points lower, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been falling recently, it may be a good time to take a serious look. A refinance is often worth its cost several times over, considering the advantages that come, as well as a lower interest rate.
When you refinance, you could be able to lower the interest rate and monthly payment amount, sometimes by a lot. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You could have the option to refinance into a shorter-term mortgage program, enabling you to build up your equity faster.
All of these benefits do come with some expense, though. When you refinance, you're paying for many of the same things you were charged for during your existing mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might offer to pay points (prepaid interest) to gain a better interest rate. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the life of the new loan can be great. You may be told that these points can be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to consult with your tax professional before making decisions based on this.
One more cost that a borrower may take into account is that a lower interest rate will lower the interest amount you'll deduct on your federal income taxes. Call us at (808) 935-0678 to help you do the math.
Most borrowers find that the savings each month balance out the up-front cost of a refinance. We can help you find out what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (808) 935-0678 to get started.
Curious about refinancing your home? Give us a call at (808) 935-0678.