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 will be at least two points lower than your present one? Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it may be time to take a serious look. A refinanced mortgage is often worth its cost many times over, because of the benefits that may come, as well as a lower interest rate.
Advantages of Refinancing
You may be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with a refinanced loan. You might also be able to "cash out" a portion of the built-up equity in your home, that you can use to consolidate debts, improve your home, or finance a vacation. With lower rates, you may also get the chance to build up home equity more quickly by switching to a shorter-term loan.
Fees and Expenses
As you probably expect, you will have some fees and expenses during the process of refinancing. With your refinance, you're paying for a lot of the same things you paid for during your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might need to pay discount points (prepaid interest) to get a more favorable rate of interest. When you pay (on average) three percent of the loan amount up front, the savings for the life of the refinanced mortgage can be substantial. Please consult with a tax professional before acting on advice that these points paid can be deducted on your federal income taxes.
Speaking of taxes, if your interest rate is reduced, naturally you'll also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that some borrowers take into account. We can help you do the math! Call us at 405-720-7064.
Most borrowers find that the savings each month quickly outweigh the initial cost of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 405-720-7064 to get you started.
Curious about refinancing? Give us a call at 405-720-7064.
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