Weighing the Options of Refinancing
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Some have said that only in the case your new interest will be at least 2 points under your current rate, should you refinance your loan. Maybe that was sound advice several years ago, but as refinance costs have been getting lower, it could be time to look into it. A refinanced loan may be worth its cost several times over, factoring in the advantages that it brings, along with a reduced interest rate.
You may be able to lower your interest rate (sometimes significantly) and make smaller monthly payments with a refinanced mortgage loan. Additionally, you could be given the option of pulling out some of the equity in your house by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build your home equity faster by moving to a shorter-term mortgage loan.
Fees and Expenses
As you probably expect, you will have to pay for the process of refinancing. You will have to pay the same sort of fees as with your existing home loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
Paying points can result in a lower interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, the savings for the term of the new loan can be significant. Please consult a tax professional before acting on advice that the points paid can be deducted on your federal income taxes.
Another thing about taxes is that when your interest rate is reduced, naturally you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more cost that borrowers consider. We can help you do the math! Call us at 701.222.0100.
Ultimately, for most people the total of initial costs to refinance are paid back soon in savings each month. We'll help you determine which program is the best fit for you, looking at your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing may have on your taxes. Call us at 701.222.0100 to get you started.
Want to know more about refinancing? Call us: 701.222.0100.