In terms of mortgage refinancing, the conventional way of thinking is that it’s good to refinance your loan if the interest is at least two points below your current rate. However, the cost of refinancing has seen new lows in recent years, so the traditional 2 point threshold oftentimes does not apply in today’s market since the long term benefits outweigh the initial cost.
Some of the benefits you can get out of refinancing is that it will significantly lower your monthly payment and interest rate. It can mean being able to “cash out” the equity you have accumulated in your home, as well as help you acquire the money to go on a well-deserved vacation – or just pay off those pesky high interest debts. When you take out a new shorter-term mortgage loan, it can come with really low interest rates that can quickly help you build up new equity .
Fees and Expenses
The truth is of course, there are also drawbacks to consider when getting a new mortgage loan. The fees associated with a mortgage will still be there including fees similar to your current home loan. There will also be other fees including settlement costs, lender’s title insurance, and settlement costs among others.
Doing the Math
If you want to benefit from a relatively low interest rate, you might find that if you make a payment of approximately 3% of the amount of the loan at closing, you will save a lot of money during the term of the refinance. Talking to a tax professional is advised of course, because even though you may think you can deduct the points on your taxes, the tax regulations are constant changing, so use due diligence.
In terms of taxes, taking out a new mortgage can also help lower the paid interest that you can subtract on federal income taxes. An expense such as this one is a major issue that borrowers take seriously. If you need help doing the math, call Bob Harms today at (904) 398-4476.
Some borrowers realize that the up-front costs of refinancing is well worth the savings they gain each month. If you need a refinance program that perfectly suits your needs, give us a call and we’ll discuss with you how refinancing can affect your taxes, the chances of selling your home in the near future and find the best option for you.
Want to know more about refinancing? Call us today at: (904) 398-4476.