Weighing the Options of Refinancing
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It has been said that only when your new interest is at least 2 points lower, should you refinance your mortgage. Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it could be time to look into it. Refinancing your loan has a number of benefits that can make it worth the up-front cost many times over.
When you refinance, you might have the ability to lower your interest rate and mortgage payment , perhaps significantly. You also may be given the option of tapping into your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build your equity quicker.
All of these benefits do cost something, though. You'll have almost the same kinds of closing expenses and fees as you did when you first bought your house. These include escrow, title, credit report, appraisal fee, lender fee and escrow/impound account. All of these costs are indifferent with all lenders. Unlike when you first bought the house, when you refinance - you have an option to either pay the closing costs or finance it into the new loan amount so you need not pay for it at closing.
Do the Math
Should I pay discount points to get a lower interest rate? If you pay (on average) 3% of the mortgage loan amount at the start, the savings for the term of the refinanced mortgage can be great. You might have heard that these points can be tax deductible, but because tax regulations are ever-changing, please consult a tax professional before depending on this.
Speaking of taxes, when you reduce your interest rate, of course you will also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that borrowers take into consideration. We can help you do the math! Call us at 206.393.0684.
Most people find that the monthly savings outweigh the initial cost of a refinance. We can help you figure out your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your cash on hand. Call us at 206.393.0684 to get started.
Want to know more about refinancing? Give us a call at 206.393.0684.