RSS FeedRefinancing a Mortgage
When you think about refinancing a mortgage, you probably want to do this to lower your interest rates, which should reduce your monthly mortgage payments. As with anything, there are good points and bad points to refinancing your mortgage. Essentially, when you refinance your mortgage, you are paying off your current mortgage by taking out a new home loan. The difficulty comes in because it’s not always to your benefit to refinance your current mortgage.
There are some things you should consider before making the decision to refinance. You should closely examine the rate of interest you have been paying and compare it to the current mortgage interest rates. When the current interest rates are least 3 or more percentage points lower than what you pay now, this is a good time to consider refinancing. The reason for this is that with a lower interest rate, you pay less interest annually. This means less interest that you will need to deduct from your income tax. There are even some refinancing costs that might be eligible for tax deduction during the year of your refinancing.
When preparing for refinancing a mortgage, you will also want to consider discount points and how they might impact the cost of the mortgage. Also, keep in mind that you could be facing additional closing costs. So, you will want to plan for that, as well.
Another thing that you will need to think about is whether or not you want to remain with your same lender. If you have had a good relationship with your lender, it might be possible to just renegotiate your mortgage at lower interest rate. This is usually done for a set fee. Renegotiating is not actually refinancing as much as it is an amendment to your current mortgage. Doing things this way does not require any closing costs.
If you and your present lender cannot come to an agreement, it is advisable to look around. Inquire about any charges you will need to pay, and compare interest rates along with closing costs. You will find that closing costs vary. These are dependent on things like the age of your current loan, the present mortgage market, any promotions a lender may have, and lender policies. Keep in mind that the final charges of refinancing will usually run between 3 percent and 7 percent of the full amount of the mortgage. This will help you decide which way you should go.
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