Weighing the Options of Refinancing

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Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points below your present rate? That might have been sound advice a while back, but with the fact that refinancing has been costing less in recent years, it's a good time to explore the options of a new mortgage! Refinancing has various advantages that can make it worth the up-front expenditure several times over.

Benefits from Refinancing

When you refinance, you might be able to reduce the interest rate and monthly payment , sometimes by a lot. You also may have the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build your home equity faster by changing to a shorter term mortgage.

Fees and Expenses

All of these advantages do come with some expense, though. When you refinance, you're paying for a lot of the same things you paid for when you got your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to be given a reduced interest rate. The amount you will save on the life of the loan could be significant if you've paid up front about 3% of the new loan balance. Please consult a tax professional before acting on advice that these points paid can be deducted on your federal income taxes.

One more cost that borrowers may consider is that a lower interest rate will reduce the interest amount you'll be able to deduct from your federal income taxes. We can help you do the math! Call us at 719-331-6278.

Ultimately, for most people the amount of initial costs to refinance will be paid back soon in savings each month. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at 719-331-6278 to get started.

Want to know more about refinancing? Call us: 719-331-6278.

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