Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate is at least 2 points below your existing one? That could have been accurate years ago, but with refinancing dropping in cost recently, it is never the wrong time to consider a new loan! A refinanced mortgage is often worth its cost many times over, factoring in the advantages that it brings, as well as a lower interest rate.
When you refinance, you might have the ability to reduce your interest rate and monthly mortgage payment amount, perhaps significantly. You might also be able to "cash out" some of your equity, that you are able use to take care of higher interest debts, make home improvements, or plan a vacation. With lower rates, you might also get the chance to build your home equity more quickly by changing to a shorter-term mortgage loan.
Fees and Expenses
As you probably know, you'll have to pay for your process of refinancing. You will have the same kinds of expenses and fees as with your current mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
When you refinance your existing loan too soon, there might be a penalty . This depends on the terms of your current mortgage. These penalties might just apply to the first year or two of the mortgage. We'll help you figure it out: contact us at 405-418-8545.
Doing the Math
You might offer to pay discount points (prepaid interest) to get a lower interest rate. Your savings on the life of the loan might be substantial if you have paid up front about three percent of the new loan balance. You may have heard that the points can be tax deductible, but since tax regulations can be difficult to keep up with, we urge you to speak with your tax professional before considering this in your calculations.
Another thing about taxes is that once your interest rate is reduced, naturally you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is one more expense that borrowers take into account. Call us at 405-418-8545 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 find out what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your cash on hand. Call us at 405-418-8545 to get you started.
Looking for mortgage advice? We'll be glad to answer your questions about our many mortgage solutions! Give us a call today at 405-418-8545. Ready to begin? Apply Here