Weighing the Options of Refinancing

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Ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least two points below your current rate? Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing your loan has a variety of benefits that often make it worth the up-front cost several times over.

Advantages of Refinancing

When you refinance, you may have the ability to lower the interest rate and mortgage payment amount, sometimes by a lot. You may also be able to "cash out" a portion of your equity, which you are able use to take care of higher interest debt, improve your home, or finance a vacation. With lower interest rates, you might also get the chance to build your home equity more quickly by moving to a shorter term mortgage loan.

Fees and Expenses

As you probably expect, you will have to pay for the process of refinancing. You'll pay the same types of expenses and fees as you did with your current mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might offer to pay points (prepaid interest) to attain a more favorable rate of interest. The amount you will save on the life of the mortgage loan might be substantial if you have paid up front about three percent of the new loan total. We recommend that you talk to a tax professional before acting on hear-say that these points paid may 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 on your federal income taxes. Call us at 954.920.9799 to help you do the math.

Ultimately, for most the total of up-front costs to refinance are made up very quickly in monthly savings. We will work with you to determine which loan program is the best fit for you, looking at your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing might have on your taxes. Call us at 954.920.9799 to get you started.

Want to know more about refinancing your home? Call us at 954.920.9799.

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