Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points below your existing one? That might have been good advice years ago, but with refinancing dropping in cost over the last few years, it's never the wrong time to explore the options of a new mortgage! Refinancing your mortgage has a number of benefits that can make it worth the up-front cost a few times over.

Benefits

When you refinance, you might have the ability to lower the interest rate and mortgage payment amount, sometimes by a lot. You may also be able to "cash out" a portion of the built-up equity in your home, that you will be able use to take care of higher interest debts, make home improvements, or take a vacation. You might have the option to refinance to a shorter-term mortgage, giving you the ability to build up your equity faster.

The Cost

All of these advantages do come with some expense, though. You'll have the same types of expenses and fees as you did with your present home loan. Included in your costs will probably 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 gain a lower rate of interest. Your savings on the life of the mortgage loan might be substantial if you've paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on rumors that these points paid may be deducted on your taxes.

Another cost that borrowers may take into account is that a lower interest rate will reduce the interest amount you will be able to deduct from your taxes. We can help you do the math! Call us at 754-202-4376.

Most people find that the monthly savings balance out the initial expenses of a refinance. We can help you figure out your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 754-202-4376 to get started.

Curious about refinancing your home? Call us at 754-202-4376.

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