Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points below your present one? Maybe that was good advice several years ago, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinance may be worth its cost many times over, considering the benefits that it brings, along with a lower interest rate.

Benefits

You may be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced loan. You also might be given the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage loan, giving you the ability to build up your home equity quicker.

Expenses and Fees

As you probably know, you'll have to pay for your the refinance process. You'll be charged the same types of fees as you did with your current mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might look into paying points to be given a better interest rate. If you pay (on average) three percent of the loan amount initially, your savings for the life of the new mortgage loan can be significant. You might have heard that the points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please consult with your tax professional before making decisions based on this.

An additional cost that a borrower may take into account is that a lower interest rate will lower the interest amount you will deduct on your taxes. Call us at 719-331-6278 to help you do the math.

All things considered, for most borrowers the amount of initial costs to refinance will be paid back very quickly in monthly savings. We'll help you figure out what mortgage program is the ideal fit for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and what effect refinancing may have on your taxes. Call us at 719-331-6278 to get started.

Want to know more about refinancing your home? Give us a call: 719-331-6278.

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