Weighing the Options of Refinancing
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Some have said that only in the case your new interest is at least two points lower, should you refinance your loan. Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing your mortgage loan has a variety of benefits that can make it worth the up-front expenditure a few times over.
Advantages of Refinancing
When you refinance, you may have the ability to lower your interest rate and mortgage payment amount, perhaps considerably. You also may have the option of tapping into the equity in your property by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build up home equity more quickly by changing to a shorter term mortgage loan.
The Cost
As you probably expect, you'll have some fees and expenses during the the refinance process. With your refinance, you are paying for a lot of the same things you paid for when you got your existing mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could offer to pay points (prepaid interest) to get a more favorable interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the new loan can be significant. You may have heard that points may be deducted on your income taxes, but as tax regulations can be ever-changing, we urge you to consult with your tax professional before depending on this.
One more expense that borrowers may consider is that a reduced interest rate will reduce the interest amount you'll deduct on your taxes. Call us at (808) 935-0678 to help you do the math.
All things considered, for most the amount of initial costs to refinance will be made up very quickly in monthly savings. We will work with you to figure out which program is ideal for you, considering 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 you started.
Want to know more about refinancing your home? Call us: (808) 935-0678.