Weighing the Options of Refinancing

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Some have said that only if your new interest is at least 2 points below your current rate, should you refinance your loan. That may have been accurate a while back, but with refinancing dropping in cost in recent years, it's a good time to consider a new mortgage loan! A refinanced loan is often worth its cost several times over, factoring in the benefits that it brings, in addition to a reduced interest rate.

Benefits

When you refinance, you might be able to lower the interest rate and monthly payment amount, sometimes by a lot. You also could have the option of pulling out some of the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You could have the option to refinance into a shorter-term mortgage program, enabling you to build up your home equity quicker.

Expenses and Fees

Of course, you'll have some fees and expenses during your process of refinancing. When you refinance, you are paying for basically the same things you paid for during your original mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can help you get a lower interest rate. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the new mortgage can be significant. You might be told that the points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult with your tax professional before making any decisions based on this.

An additional cost that a borrower may consider is that a reduced interest rate will lower the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at (260) 338-2561.

Most people find that the savings each month quickly balance out the initial expenses of refinancing. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (260) 338-2561 to get started.

Curious about refinancing your home? Give us a call at (260) 338-2561.

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