Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least 2 points below your present rate? Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it may be a good time to take a serious look. A refinanced mortgage may be worth its cost many times over, because of the benefits that it brings, along with a lower interest rate.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with your refinanced mortgage loan. Additionally, you might be given the option of tapping into the equity in your home by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You might have the option to refinance to a shorter-term mortgage loan, enabling you to build up your equity quicker.

The Cost

Of course, you will have to pay for your the refinance process. You will have to pay the same types of fees as you did with your current mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Do the Math

You might offer to pay points (prepaid interest) to gain a more favorable interest rate. When you pay (on average) three percent of the mortgage loan amount at the start, your savings for the life of the new loan can be great. You might have heard that the points can be deducted on your income taxes, but since tax regulations can be ever-changing, we urge you to speak with your tax professional before making any decisions based on this.

One more cost that a borrower might take into account is that a lower rate of interest will reduce the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at (478) 746-2063.

All things considered, for most borrowers the total of up-front costs to refinance are made up very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (478) 746-2063 to get you started.

Curious about refinancing your home? Call us: (478) 746-2063.

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