Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least two points under your current one? Maybe that was good advice several years ago, but as refinance costs have been getting lower, it could be a good time to look into it. A refinance is often worth its cost many times over, factoring in the benefits that it brings, along with a lower interest rate.

Advantages of Refinancing

You might be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage loan. Additionally, you might have the option of tapping into your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage, enabling you to build your home equity faster.

The Cost

All these benefits do come with some expense, though. You will pay the same kinds of expenses and fees as you did with your existing mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might look into paying points to be given a lower interest rate. The amount you will save over the life of the mortgage might be substantial if you have paid up front about three percent of the new loan balance. Please consult with a tax professional before acting on hear-say that the paid points can be deducted on your federal income taxes.

Speaking of taxes, if you reduce your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct on your taxes. This is one more cost that some borrowers take into account. We can help you do the math! Call us at (281) 778-0805.

Most people find that the monthly savings outweigh the initial cost of refinancing. We can help you figure out your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (281) 778-0805 to get started.

Want to know more about refinancing? Give us a call: (281) 778-0805.

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