Weighing the Options of Refinancing

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Ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least two points below your current rate? That may have been sound advice a while back, but with the fact that refinancing has been costing less recently, it's never the wrong time to consider a new loan! A refinance can be worth its cost several times over, factoring in the benefits that may come, as well as a lower interest rate.

Advantages

When you refinance, you may have the ability to lower your interest rate and mortgage payment amount, perhaps considerably. Additionally, you could be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you might also be able to build up home equity more quickly by switching to a shorter term loan.

The Cost

Of course, you'll have some fees and expenses during your the refinance process. You will pay the same kinds of fees as with your present home loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might look into paying points to reduce your interest rate. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the refinanced mortgage can be great. You may have heard that these points may be deducted on your income taxes, but as tax regulations can be ever-changing, please speak with a tax professional before making any decisions based on this.

One more cost that a borrower might consider is that a lower interest rate will lower the interest amount you'll deduct on your taxes. Call us at (972) 292-0448 to help you do the math.

Most borrowers find that the savings each month quickly outweigh the up-front cost of refinancing. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (972) 292-0448 to get you started.

Curious about refinancing? Give us a call: (972) 292-0448.

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