What direction do you think interest rates are headed in?
Were driving home variable rate mortgages run for all rates hit 20% in 1980. Since then, interest rates have a long and steady decline. Along the way, borrowers could refinance their home and take more money as the property value is increasing. Times have changed just a little bit. Declining interest rates gave borrowers wind. Seems to have turned. It's starting to look more like the classic 1980 Bob Seger song "Against the wind ."
Many variable rate mortgages have an annual cap of 2% and a lifetime cap of 6%. So, if mortgages began in the 4% it can not go up more than 6% after one year. He also could not go more than 10% after three years. Thus, while the variable rate mortgage make sense to drop the interest rate environment in recent 30 years, it no longer seems appropriate.
If you have a variable interest rate, take a hard look at refinancing to a fixed interest rate.
Just to be clear, not everyone should refinance their variable rate mortgages. If you are planning a move in the near future, the cost of refinancing can not be justified. You've got a "small number" to see what the potential payback.
Of course, to refinance, you will need to have equity in the property. Even if you have equity in real estate, refinancing may be rules have gone completely the opposite way from just a few years. It was not so long ago, when all you need is a pencil to get a mortgage. As one of my friends said: "There are a lot of ink in this world." It's going to take more than a pen to get your home refinanced today. Lenders now want copies of W-2 forms, income tax returns, bank statements and other documents for loan approval.
One of the advantages of mortgage interest on your residence that is tax deductible. However, there are few restrictions on it. The amount of interest deducted shall not exceed one million of interest on the debt when the property is bought or built. There is additional support for another $ 100,000 in home equity line of credit interest. Mortgage interest can be deducted on your first (primary) and a second home. Points paid to secure a mortgage to purchase your primary residence can be deducted in the year paid. Points paid for refinancing must be amortized (expense) during the term of the loan. Personal interest, which includes auto loans, credit card debt and other consumer loans, no income tax is deducted. This makes these loans even more expensive.
If you have a variable rate mortgage will need to refinance to a fixed rate mortgage?
