Weighing the Options of Refinancing

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Ever hear the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points below your existing rate? Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it may be a good time to take a serious look. A refinance is often worth its cost many times over, considering the advantages that come, in addition to a lower interest rate.

Benefits

When you refinance, you may be able to lower the interest rate and mortgage payment , sometimes considerably. You also might have the option of tapping into the equity in your home by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build your home equity faster by switching to a shorter term mortgage loan.

Fees and Expenses

As you probably know, you will have some fees and expenses during your process of refinancing. You will pay the same sort of fees as you did with your existing home loan. These could include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might think about paying points to get a lower interest rate. If you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the refinanced mortgage loan can be significant. Please consult a tax professional before acting on rumors that these paid points may be deducted on your taxes.

Speaking of taxes, once your interest rate is lowered, of course you'll also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is another cost that borrowers consider. We can help you do the math! Call us at 866-840-8745 x2.

In the end, for most borrowers the amount of up-front costs to refinance are paid back very quickly in monthly savings. We'll work with you to determine which mortgage program is the ideal fit for you, considering your cash on hand, the likelihood of selling your house in the next few years, and how refinancing can effect your taxes. Call us at 866-840-8745 x2 to get started.

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

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