Weighing the Options of Refinancing

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least two points lower than your existing rate? That might have been accurate a while back, but as refinancing has been costing less recently, it is a good time to think about a new mortgage loan! Refinancing has a number of advantages that will often make it worth the up-front cost a few times over.

Benefits

You may be able to lower your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage loan. You could also be able to "cash out" some of the built-up equity in your home, that you are able use to take care of higher interest debts, improve your home, or plan a vacation. You may be able to refinance into a shorter-term mortgage, enabling you to add to your home equity faster.

The Cost

All these advantages do cost something, though. You will pay the same sort of fees as you did with your current home loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You could need to pay discount points (prepaid interest) to get a lower interest rate. The money you'll save over the life of the mortgage could be substantial if you have paid up front about three percent of the new loan balance. You might have heard that these points can be tax deductible, but because tax regulations can be ever-changing, please speak with a tax professional before making decisions based on this.

Another thing about taxes is that once you lower your interest rate, naturally you'll also be lowering the interest amount that you'll be able to deduct on your federal income taxes. This is another expense that some borrowers consider. Call us at 2603382561 to help you do the math.

Ultimately, for most the total of up-front costs to refinance will be made up very quickly in monthly savings. We'll help you find out which loan program is ideal for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and how refinancing will effect your taxes. Call us at 2603382561 to get started.

Want to know more about refinancing your home? Give us a call at 2603382561.

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