Weighing the Options of Refinancing

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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least 2 points below your present one? Maybe several years ago that was good advice, but as refinance costs have been getting lower, it could be time to take a serious look. A refinanced loan is often worth its cost many times over, considering the benefits that it brings, as well as a lower interest rate.

Benefits

You might be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also be able to build up home equity faster by moving to a shorter term loan.

The Cost

Of course, you will have some fees and expenses during your process of refinancing. You will have the same kinds of expenses and fees as you did with your existing mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying discount points can result in a lower interest rate. If you pay (on average) three percent of the loan amount up front, the savings for the life of the new mortgage can be substantial. You might hear that these points may be deducted on your income taxes, but because tax regulations can be difficult to keep up with, please consult a tax professional before considering this in your calculations.

Speaking of taxes, if you bring down your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that some borrowers take into account. We can help you do the math! Call us at 866-840-8745 x2.

Most people find that the savings per month quickly balance out the up-front expenses of refinancing. We will work with you to figure out which loan program is ideal for you, looking at your cash on hand, how likely you are to sell your home in the near future, and how refinancing will effect your taxes. Call us at 866-840-8745 x2 to get started.

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

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