Weighing the Options of Refinancing

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Some have said that only in the case your new interest will be at least 2 points lower, should you refinance your loan. Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing your loan has a number of benefits that will often make it worth the initial cost many times over.

Advantages of Refinancing

When you refinance, you might have the ability to lower your interest rate and monthly payment amount, perhaps considerably. You also could be given the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage loan, enabling you to build up your home equity quicker.

The Cost

All these benefits do come with some expense, though. You will have to pay the same kinds of fees as you did with your current mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Do the Math

You might need to pay discount points (prepaid interest) to gain a lower interest rate. The amount you will save on the life of the loan might be significant if you have paid up front about three percent of the new loan total. You may hear that these points can be tax deductible, but as tax regulations are ever-changing, please consult with a tax professional before making any decisions based on this.

Speaking of taxes, when your interest rate is lowered, naturally you'll also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that borrowers take into consideration. We can help you do the math! Call us at 972-932-9083.

In the end, for most people the amount of up-front costs to refinance will be paid back very quickly in savings each month. We will help you determine what program is the ideal fit for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing might effect your taxes. Call us at 972-932-9083 to get started.

Want to know more about refinancing your home? Call us: 972-932-9083.

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