Weighing the Options of Refinancing

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Some have said that only if your new interest will be at least two points under your current rate, should you refinance your mortgage. Perhaps that was sound advice a number of years ago, but since refinance costs have been falling recently, it may be a good time to look into it. Refinancing has a variety of benefits that can make it worth the initial cost several times over.

Advantages

You could be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with a refinanced mortgage. You might also have the ability to "cash out" some of your equity, which you are able use to consolidate debt, add on to your home, or take a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by changing to a shorter term loan.

Fees and Expenses

All of these advantages do cost something, though. When you refinance, you're paying for basically the same things you paid for during your existing mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might investigate paying points to be given a reduced interest rate. Your savings over the life of the mortgage may be significant if you have paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on hear-say that any paid points may be deducted on your federal income taxes.

An additional expense that a borrower may consider is that a lower rate of interest will lower the interest amount you'll be able to deduct on your taxes. We can help you do the math! Call us at (281) 778-0805.

Ultimately, for most borrowers the amount of initial costs to refinance are paid back soon in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (281) 778-0805 to get you started.

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

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