Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least 2 points lower than your current one? That may have been true years ago, but since refinancing has been costing less over the last few years, it's never the wrong time to consider a new mortgage loan! Refinancing your mortgage loan has a variety of advantages that often make it worth the up-front expenditure a few times over.
Benefits
When you refinance, you might be able to reduce the interest rate and monthly payment amount, sometimes by a lot. You might also be able to "cash out" a portion of the built-up equity in your residence, that you are able use to take care of higher interest debts, make home improvements, or take a vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build your home equity faster.
The Cost
All of these benefits do cost something, though. When you refinance, you're paying for basically the same things you were charged for during your original mortgage. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
Paying discount points can help you attain a better interest rate. When you pay (on average) 3% of the loan amount at the start, the savings for the term of the new mortgage can be significant. You may have heard that the points can be tax deductible, but as tax regulations can be difficult to keep up with, please speak with a tax professional before considering this in your calculations.
One more expense that a borrower might take into account is that a lower rate of interest will lower the interest amount you will deduct from your taxes. Call us at (808) 935-0678 to help you do the math.
Most people find that the savings each month quickly outweigh the initial expenses of a refinance. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (808) 935-0678 to get you started.
Curious about refinancing? Call us: (808) 935-0678.