Mortgage interest rates are bouncing around and appear to be starting to creep up which may give homeowners one more opportunity to lock in the lowest rate.

 

Some people who refinanced their home last year are refinancing again because the rates have come down so much in the past six months. The basic decision making a criterion is whether you’ll continue to own the home long enough to recapture the cost of refinancing.

Why are you refinancing?

  • To lower your payments and save on interest
  • To shorten the term to pay the loan off sooner
  • To take additional cash out of equity to consolidate debts or provide spare cash

Things to consider:

  1. Points on a refinance are not deductible in the year paid and must be amortized. You may want to consider a loan without points or loan origination fee but a slightly higher interest rate which will be deductible. Your loan officer can price the mortgage this way.
  2. Consider a shorter term than the standard 30 year loan. The rates are usually lower and you’ll build equity faster not to mention pay off the loan sooner also. See table below.
  3. Consider a FHA loan even though you will have to pay Mortgage Insurance Premium. The loan is assumable with buyer’s qualification. Today’s lower rates may make it more valuable to a buyer in the future as an assumption.
  4. Just because a lender will loan you more than your current unpaid balance doesn’t mean the interest on the mortgage will be deductible. If you are concerned about interest deductibility, you should check with your tax advisor before you close on the refinance. You can also review IRS Publication 529 Home Mortgage Interest Deduction.

$100,000 Loan

Interest Rate

Payment (P&I)

Unpaid EOY7

30 year fixed rate

4.5%

$506.69

$87,026

15 year fixed rate

4%

$739.69

$60,684

Difference

.5%

$233.00

$26,342

Interested in knowing what you might expect to save and how long it would take to recapture the cost of refinancing, give me a call with your original mortgage amount, interest rate, term and unpaid balance. I can run a Refinancing Analysis while you’re on the phone or you can enter it directly in my Refinance Analysis app.