Weighing the Options of Refinancing

Ever hear the pearl of wisdom that says you should only consider refinancing if your new interest rate will be at least two points lower than your existing one? That may have been accurate years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to explore the options of a new mortgage loan! A refinance is often worth its cost many times over, considering the benefits that it brings, in addition to a lower interest rate.

Advantages of Refinancing

You might be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced mortgage. You may also have the ability to "cash out" some of your equity, which you can use to consolidate debt, improve your home, or finance a vacation. With reduced interest rates, you might also be able to build your home equity faster by moving to a shorter term mortgage loan.

Fees and Expenses

All these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you were charged for during your original mortgage loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

You may have to make a penalty payment if you refinance your current loan too quickly. This depends on the terms of your current mortgage. However, this type of penalty may apply just to the initial several years of the loan. We will help you figure it out: contact us at 866-300-1550.

Do the Math

You might need to pay discount points (prepaid interest) to attain a better interest rate. If you pay (on average) three percent of the loan amount initially, the savings for the term of the refinanced loan can be significant. Please consult with a tax professional before acting on hear-say that any paid points may be deducted on your taxes.

Speaking of taxes, when you lower your interest rate, of course you will also be lowering the interest amount that you will be able to deduct on your taxes. This is one more expense that borrowers consider. Call us at 866-300-1550 to help you do the math.

All things considered, for most people the total of initial costs to refinance are made up very quickly in monthly savings. We'll work with you to determine which mortgage loan program is ideal for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing can effect your taxes. Call us at 866-300-1550 to get you started.