Weighing the Options of Refinancing

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Some have said that only in the case your new interest will be at least 2 points under your current rate, should you refinance your mortgage. Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing has various advantages that will often make it worth the up-front expenditure many times over.

Benefits

When you refinance, you could be able to lower your interest rate and monthly payment , perhaps considerably. You might also have the ability to "cash out" some of your home equity, which you may use to consolidate debts, improve your home, or finance a vacation. You may be able to refinance into a shorter-term mortgage program, enabling you to add to your equity quicker.

The Cost

All of these advantages do come with some expense, though. With your refinance, you're paying for many of the same things you were charged for during your existing mortgage loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might need to pay discount points (prepaid interest) to attain a more favorable interest rate. If you pay (on average) three percent of the loan amount up front, your savings for the life of the refinanced loan can be great. You might hear that these points may be tax deductible, but since tax regulations can be difficult to keep up with, please consult your tax professional before making decisions based on this.

Another cost that borrowers may consider is that a reduced interest rate will lower the interest amount you'll deduct on your federal income taxes. Call us at 866-840-8745 x2 to help you do the math.

Most people find that the savings per month outweigh the up-front cost of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at 866-840-8745 x2 to get started.

Curious about refinancing? Give us a call at 866-840-8745 x2.

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