More than any other time in the past three decades, home interest rates are at their lowest. For this reason, we see many homeowners considering the option of refinancing an existing home loan. If you are in this situation, you have an option of working with the same lender on your original mortgage or a different lender. Regardless, just remember that refinancing is much like a first loan, meaning you would need a down payment, and go through closing, and so on.
As with your first mortgage loan, you always want to take the time to find the best mortgage and the best interest rate. For this, you would need to go over your budget, just as you did previously, to determine what you can and cannot afford to do. However, refinancing also provides you with a great opportunity to consider different loans types. For instance, if you started out with an Adjustable Rate Mortgage, believing you would stay in the home just a few years but have decided to stay, then you might look at a Fixed Rate Mortgage when refinancing.
Just remember that there are many different costs and fees that go along with a refinance so you want to make sure you understand what all will come out of pocket. For instance, you might still pay for underwriter fees, title insurance, an appraisal, and many of the same things you paid for when you first purchased the home. In addition, talk to the various lenders about points to see if this would be yet another cost to you.
We also recommend your ender complete an amortization, which will identify how much money you would have going out on your new mortgage loan each month. Remember, if you have decided to stay put in your home for many more years, then a lower interest rate makes the best sense. For points on mortgage loans for a refinance, these are generally not tax deductible. The only time they may be is if you would be using the loan toward home improvement projects. The bottom line is that refinancing can save you significant money but before diving in, talk to various lenders so you secure the best deal possible.