Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate is at least two points below your present rate? That could have been true a while back, but with the fact that refinancing has been costing less recently, it's never the wrong time to think about a new mortgage! Refinancing has various benefits that can make it worth the initial expenditure a few times over.

Benefits

You could be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage. Additionally, you might have the option of pulling out some of your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You might have the option to refinance into a shorter-term mortgage loan, giving you the ability to build up your home equity faster.

The Cost

Of course, you'll have to pay for the the refinance process. With your refinance, you're paying for a lot of the same things you were charged for when you got your existing mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might need to pay points (prepaid interest) to get a better interest rate. Your savings on the life of the mortgage loan may be substantial if you have paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on hear-say that the points paid can be deducted on your federal income taxes.

Speaking of taxes, once your interest rate is reduced, naturally you'll also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is another cost that some borrowers take into account. Call us at 877-310-6200 to help you do the math.

All things considered, for most people the amount of initial costs to refinance are paid back very quickly in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at 877-310-6200 to get you started.

Want to know more about refinancing? Call us: 877-310-6200.

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