Weighing the Options of Refinancing

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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least 2 points under your present rate? Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has a variety of benefits that often make it worth the up-front expenditure many times over.

Benefits

You could be able to lower your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage. You also might be given the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With reduced rates, you may also get the chance to build your home equity faster by changing to a shorter term mortgage.

The Cost

All of these benefits do cost something, though. When you refinance, you're paying for basically the same things you paid for when you got your current mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying points can get you a lower interest rate. Your savings over the life of the mortgage loan may be significant if you have paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on hear-say that the paid points can be deducted on your taxes.

Speaking of taxes, if you lower your interest rate, it follows that you will also be lowering the interest amount that you can deduct from your taxes. This is another expense that some borrowers consider. Call us at (800) 974-0509 to help you do the math.

Ultimately, for most people the total of initial costs to refinance will be made up soon in savings each month. We'll help you find out which mortgage loan program is the right fit for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and what effect refinancing could have on your taxes. Call us at (800) 974-0509 to get started.

Curious about refinancing? Give us a call: (800) 974-0509.