Pennsylvania Mortgage Refinance Considerations
- Even a small rate cut can pay off quickly. That's because you can easily find Pennsylvania mortgage companies willing to waive routine refinancing charges such as application, appraisal and legal fees (which can add up to $1,500 to $3,000). Of course, in exchange for low or no up front costs, you'll have to be willing to accept a rate that's somewhat higher than the prevailing rock bottom.
Refinance Once, Then Do It Again - If you are considering a second refinancing, don't overlook this potential tax write off: When you pay points to refinance, you must deduct the amount over the life of the loan, usually 30 years. But when you refinance a second time, all of the points that have not yet been deducted from the first refinancing can be written off in a lump sum.
Build Home Equity Faster - Many borrowers use a refinance to shorten the term of their Pennsylvania mortgage. And brace yourself: Even at low rates, a shorter term means a higher monthly payment. The benefit is that you'll build up equity faster and pay far less in total interest over the life of the loan.
Get Your Hands on Some Cash - Another way to make a refinance work for you is to refinance for more than the balance remaining on your old mortgage -- in effect, tapping your home equity, or "cashing out," in Pennsylvania mortgage speak. Thanks to favorable rates, you may be able to do so without boosting your monthly outlay.
Pennsylvania Mortgage Refinance Costs - When you refinance your mortgage, you usually pay off your original mortgage and sign a new loan. With a new loan, you again pay most of the same costs you paid to get your original mortgage. These can include settlement costs, discount points, and other fees. The total expense for refinancing a Pennsylvania mortgage depends on the interest rate, number of points, and other costs required to obtain a loan. To obtain the lowest rate offered, most mortgage companies will charge several points, and the total cost can run between three and six percent of the total amount you borrow. However, some Pennsylvania companies may offer zero points at a higher interest rate, which may significantly reduce your initial costs, although your payments may be somewhat higher.
Deciding To Refinance - With traditional refinancing, the most often cited rule of thumb is that the interest rate for your new mortgage must be about 2 percentage points below the rate of your current Pennsylvania mortgage for refinancing to make sense. However, with the newer low and no cost refinancing programs, it can be worth your while to refinance to obtain a smaller reduction in interest rates. How long you expect to stay in your home is also a factor to consider. If you'll be moving in a few years, the month to month savings may never add up to the costs that are involved in a refinancing.
