Weighing the Options of Refinancing

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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 loan. That could have been true years ago, but with refinancing dropping in cost recently, it is never the wrong time to consider a new mortgage loan! Refinancing your mortgage loan has a variety of advantages that often make it worth the up-front expenditure a few times over.

Benefits

You could be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced mortgage loan. You could also be able to "cash out" a portion of your equity, that you are able use to take care of higher interest debts, improve your home, or finance a vacation. You may have the option to refinance into a shorter-term mortgage, enabling you to build your equity quicker.

Fees and Expenses

All these benefits do cost something, though. You'll have the same kinds of expenses and fees as with your current mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might offer to pay discount points (prepaid interest) to gain a better interest rate. When you pay (on average) three percent of the mortgage loan amount at the start, your savings for the term of the new mortgage can be significant. You may hear that points may be tax deductible, but as tax regulations are ever-changing, we urge you to consult a tax professional before depending on this.

Speaking of taxes, when your interest rate is reduced, of course you will also be lowering the interest amount that you may deduct from your taxes. This is one more expense that borrowers take into consideration. Call us at 719-425-2226 to help you do the math.

Most people find that the savings per month balance out the up-front cost of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your money on hand. Call us at 719-425-2226 to get started.

Curious about refinancing? Give us a call: 719-425-2226.