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 your new interest rate is at least 2 points below your current rate? Perhaps that was sound advice a number of years ago, but since refinance costs have been falling recently, it may be time to take a serious look. A refinance can be worth its cost many times over, factoring in the advantages that can come, along with a reduced interest rate.

Benefits from Refinancing

You may be able to bring down your interest rate (sometimes by a lot) and have smaller mortgage payments with a refinanced loan. You could also be able to "cash out" some of the built-up equity in your residence, that you can use to take care of higher interest debts, improve your home, or plan a vacation. You might have the option to refinance into a shorter-term mortgage, giving you the ability to build your equity quicker.

Expenses and Fees

Of course, you will have some fees and expenses during your process of refinancing. You will pay the same sort of expenses and fees as with your existing home loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Do the Math

You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount up front, the savings for the term of the refinanced loan can be significant. You may hear that points may be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before depending on this.

An additional cost that borrowers may take into account is that a lower interest rate will reduce the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at 561-392-0040.

Most people find that the savings each month balance out the up-front expenses of a refinance. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your cash on hand. Call us at 561-392-0040 to get you started.

Want to know more about refinancing your home? Give us a call at 561-392-0040.

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