Weighing the Options of Refinancing
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Some have said that only when your new interest will be at least two points lower, should you refinance your loan. Maybe that was good advice a number of years ago, but since refinance costs have been falling recently, it may be a good time to take a serious look. A refinance can be worth its cost several times over, because of the benefits that can come, as well as a lower interest rate.
You might be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced loan. You may also be able to "cash out" a portion of the built-up equity in your home, which you are able use to take care of higher interest debts, add on to your home, or finance a vacation. You might be able to refinance to a shorter-term mortgage, enabling you to add to your equity quicker.
Fees and Expenses
All these advantages do come with some expense, though. With your refinance, you are paying for most of the same things you paid for during your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might look into paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount initially, your savings for the term of the new mortgage can be great. You may hear that the points may be deducted on your income taxes, but as tax regulations can be ever-changing, please consult with your tax professional before depending on this.
An additional cost that a borrower might consider is that a lower rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. Call us at 516 536-2525 to help you do the math.
Most people find that the monthly savings balance out the initial expenses of a refinance. We can help you figure out your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at 516 536-2525 to get you started.
Want to know more about refinancing? Call us: 516 536-2525.
Licensed Mortgage Banker - NYS Department of Financial Services
NMLS ID #34763