Weighing the Options of Refinancing

It has been said that only in the case your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That may have been true a while back, but with refinancing dropping in cost over the last few years, it is a good time to explore the options of a new mortgage! Refinancing has some advantages that can make it worth the up-front cost many times over.

Advantages

When you refinance, you may be able to lower the interest rate and monthly mortgage payment amount, perhaps by a lot. Additionally, you might have the option of pulling out some of 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, enabling you to build up your home equity quicker.

Expenses and Fees

All of these advantages do come with some expense, though. When you refinance, you are paying for basically the same things you paid for at the time you obtained your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

You could be required to pay a penalty if you refinance your existing loan too soon. It all depends on your current loan contract. There are penalties that just apply to the first year or two of the loan. We will help you figure it out: contact us at 800-681-1036.

Do the Math

You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount up front, your savings for the term of the new mortgage loan can be significant. We recommend that you talk to a tax professional before acting on advice that any paid points may be deducted on your taxes.

One more expense 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 800-681-1036.

Most people find that the savings per month quickly outweigh the up-front cost of refinancing. We'll work with you to find out which mortgage loan program is best for you, looking at your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing will probably have on your taxes. Call us at 800-681-1036 to get you started.