![]() ![]() You can also refinance to change your mortgage term length ARMs usually offer lower monthly payments than fixed-rate mortgages, so refinancing when rates are dropping can deliver double savings.Ĭheck today's mortgage rates. On the flip side, converting a fixed-rate loan to an ARM might make sense for homeowners who plan to sell their homes in the near future. If you’re a homeowner who initially got an ARM to purchase your home, refinancing to a fixed-rate mortgage could provide more consistent payment stability if you plan on staying there long-term. After that, your interest rate will be determined by the market-meaning your costs could spike if market factors aren’t favorable. With an adjustable-rate mortgage, or ARM, you typically pay a set amount of interest for the first few years of the loan. Switching from an adjustable-rate to a fixed-rate mortgage (or vice versa) can provide serious financial advantages depending on how long you plan to stay in your home. Consider refinancing to change your mortgage type Most people think refinancing is all about locking in a lower interest rate, but there are plenty of other worthwhile reasons to refinance. When you refinance your mortgage, you're exchanging the current terms of your mortgage for new ones. The cost of refinancing averages between 2%-5% of your loan amount, so be sure to add that expense in the “Cost of refinance” section of the refi calculator. You probably wouldn’t want to refinance your loan and then sell your home a year later (before you’ve had a chance to make back the initial cost of refinancing). Maximizing the value of your refinance comes down to timing.īecause out-of-pocket closing costs will set you back at the start of your new loan term, you need to be sure you’ll keep the refinanced mortgage long enough to recoup that initial upfront loss and then benefit from the savings long-term. (Remember that a home loan’s monthly cost is determined by more than just principal and interest-use our mortgage calculator to understand the other costs that can drive up the amount you pay for a home.) But the math of refinancing is a bit more complicated than just pouncing on a lower rate. Most people choose to refinance because it allows them to reduce the monthly cost of their mortgage. They will understand your unique financial circumstances and, as experts in the tax code, they can give tailored advice for your situation. If you don’t already know how your tax deductions are filed, speak to your tax professional. Note that the tax rules for cash-out refinances are slightly different, and might limit the deductions you qualify for. The calculator will default to a future and marginal tax rate of 28%, but this figure can be adjusted under the “Advanced Settings” section based on your income bracket and which deductions you expect to claim. Because of this, the calculator figures that you’ll lower your overall marginal tax rate by applying for standard deductions after you refinance. Refinancing can also qualify you for tax deductions-for example, interest payments made on the refinanced loan can be deducted from your overall taxable income. ![]() The calculator assumes you will claim tax deductions. If you invest most of your savings in the stock market, increase it to 6%.) (If you keep most of your savings in a bank account, decrease this number to 0%. The calculator applies a conservative estimate of a 3.5% return on your investment, but you can decrease or increase this amount in the “Advanced Settings” section of the calculator. To get a full picture of your maximum potential savings in any refinance scenario, this calculator assumes that you’ll be investing the money you’ve saved-building wealth by putting that extra money toward stocks and bonds. The calculator assumes you will invest your savings. Refinancing can save you money over the life of your loan, and locking in a lower rate is just the first step. How the mortgage refinance calculator works
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |