Mortgage Refinance: Taxation, Interest Rates and Points

By on | Home & Mortgage Refinance Information.

If you’re a homeowner, then you know there are several different reasons as to why you would want to refinance your mortgage. You may want to refinance in order to reduce your monthly mortgage payment or perhaps to consolidate your bills in an effort to pay off debt you have incurred over the years. Another factor you might want to consider is mortgage refinancing to protect your payment from rising interest rates.

Mortgage refinancing to lower your monthly payment is an effective way to make room in your budget for other financial needs. One way to achieve this is to look for a mortgage refinance loan with a lower interest rate that you qualify for. Being able to pay off some of your debts is a huge motivator for mortgage refinancing. It is important to keep in mind that consolidating your bills does not completely eliminate your debt, but it does make what you owe more manageable. Depending on whether you purchased your home on an adjustable interest rate; you could opt to refinance your mortgage on a fixed rate to ensure consistent interest rates in the case of economic fluctuations.

Taxation, Interest Rates and Points

How do taxation, interest rates and points come into play with mortgage refinance? First of all, your mortgage related refinancing costs are tax deductible. Additionally, points can also be deducted over the life of your home loan. However, there are some restrictions you should be aware of such as the fact that the actual amount you are able to deduct is based upon your income level. Also, keep in mind that additional charges such as closing costs, attorney fees, notary fees, and so on are not deductible.

While points are a common feature of home mortgages, it’s not always beneficial to pay points for mortgage refinancing purposes depending on your future plans. The reason for paying points in the first place is to decrease mortgage rates. In the case of mortgage refinance points, you have to make a decision about paying by considering the time frame you will keep the loan for. Holding on to the loan for a few years will make the points work to your advantage as you can save a significant amount of money. On the flip side, if you’re thinking of moving in a shorter time period and possibly refinancing for a second time, you don’t stand to gain anything from paying the points. Because life can be extremely unpredictable, sometimes the decisions you make which are based on your plans don’t exactly turn out the way you want them to, however all you can do is make an informed decision and hope to reap the rewards.

Mortgage Refinance Options

When it comes down to it, the most productive way to find out what all your options are is do some old fashion research! Get on the Internet or go down to your local library to learn more about the advantages of mortgage refinance and the taxation, interest rates and points that are involved. When you do find a lender/company that you think is right for you, don’t forget to ask important questions regarding your loan and don’t be afraid to express all of your concerns upfront, this way there are no surprises and your mortgage refinance can go as smoothly as possible.

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