Weighing the Options of Refinancing

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It has been said that only when your new interest is at least two points lower, should you refinance your loan. That may have been accurate a while back, but with the fact that refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! Refinancing has a number of advantages that can make it worth the initial cost several times over.


When you refinance, you could be able to lower the interest rate and mortgage payment amount, perhaps by a lot. You could also have the option to "cash out" a portion of the built-up equity in your home, that you are able use to consolidate debt, improve your home, or take a vacation. You may be able to refinance to a shorter-term mortgage loan, giving you the ability to add to your home equity quicker.

The Cost

As you probably know, you'll have to pay for your the refinance process. You'll have to pay the same sort of fees as you did with your existing mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Doing the Math

You might need to pay points (prepaid interest) to gain a lower interest rate. If you pay (on average) three percent of the loan amount up front, the savings for the term of the refinanced mortgage can be substantial. We recommend that you consult a tax professional before acting on advice that these points paid can be deducted on your federal income taxes.

Another cost that borrowers might take into account is that a lower rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. We can help you do the math! Call us at (800) 974-0509.

In the end, for most people the total of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (800) 974-0509 to get you started.

Want to know more about refinancing? Give us a call: (800) 974-0509.