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It has been said that only when your new interest will be at least two points below your current rate, should you refinance your mortgage. Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it could be a good time to look into it. A refinance may be worth its cost many times over, because of the benefits that may come, in addition to a reduced interest rate.
When you refinance, you could have the ability to lower the interest rate and monthly mortgage payment , perhaps considerably. You also may be given the option of tapping into the equity in your home by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower interest rates, you may also be able to build your home equity faster by moving to a shorter term mortgage.
All these advantages do come with some expense, though. You will be charged the same sort of expenses and fees as you did with your current mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
You might offer to pay points (prepaid interest) to get a lower interest rate. The money you will save over the life of the mortgage loan might be substantial if you have paid up front about three percent of the new loan total. You might be told that the points may be tax deductible, but because tax regulations are ever-changing, please speak with your tax professional before making any decisions based on this.
Speaking of taxes, when your interest rate is reduced, of course you'll also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is another cost that borrowers consider. Call us at 801-413-4570 to help you do the math.
Ultimately, for most people the total of initial costs to refinance are made up soon in savings each month. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 801-413-4570 to get you started.