Weighing the Options of Refinancing

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Ever hear the old rule of thumb that says you should only refinance if your new interest rate will be at least two points lower than your existing rate? Maybe that was good advice several years ago, but as refinance costs have been falling recently, it could be time to take a serious look. A refinanced mortgage loan is often worth its cost several times over, considering the benefits that it brings, along with a reduced interest rate.

Benefits

You may be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced 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 plan a special vacation. With reduced rates, you might also get the chance to build up home equity more quickly by moving to a shorter-term loan.

Fees and Expenses

All of these benefits do come with some expense, though. With your refinance, you're paying for basically the same things you paid for at the time you obtained your original mortgage loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

Paying discount points can get you a lower interest rate. The money you will save on the life of the mortgage may be substantial if you have paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that any points paid may be deducted on your taxes.

Speaking of taxes, when you reduce your interest rate, it follows that you'll also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another expense that borrowers take into consideration. Call us at (281) 778-0805 to help you do the math.

Most borrowers 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, how likely you may be to sell in the next couple of years, and your available cash. Call us at (281) 778-0805 to get you started.

Curious about refinancing? Give us a call: (281) 778-0805.

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