Weighing the Options of Refinancing

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It has been said that only in the case your new interest is at least 2 points under your current rate, should you refinance your mortgage. That may have been good advice a while back, but with refinancing dropping in cost recently, it's a good time to think about a new loan! Refinancing your loan has a number of benefits that often make it worth the up-front expenditure a few times over.

Advantages of Refinancing

When you refinance, you might have the ability to lower the interest rate and monthly payment amount, perhaps considerably. You could also be able to "cash out" a portion of the built-up equity in your home, which you are able use to consolidate debt, improve your home, or take a vacation. With lower interest rates, you might also be able to build up home equity more quickly by switching to a shorter-term loan.

The Cost

All of these benefits do cost something, though. You will be charged the same types of expenses and fees as with your current mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You could need to pay discount points (prepaid interest) to gain a better rate of interest. The amount you will save over the life of the loan may be significant if you've paid up front about 3% of the new loan total. We recommend that you consult a tax professional before acting on advice that these points paid can be deducted on your taxes.

Speaking of taxes, when your interest rate is reduced, of course you will also be lowering the interest amount that you'll be able to deduct on your taxes. This is one more cost that some borrowers take into account. Call us at 972-932-9083 to help you do the math.

Most people find that the monthly savings quickly outweigh the initial cost of a refinance. We can help you find out your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 972-932-9083 to get you started.

Curious about refinancing your home? Give us a call: 972-932-9083.


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