Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points lower than your current one? 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. A refinanced loan may be worth its cost several times over, because of the advantages that come, in addition to a reduced interest rate.

Benefits

When you refinance, you could have the ability to reduce the interest rate and monthly payment amount, perhaps significantly. You might also be able to "cash out" a portion of your equity, that you will be able use to take care of higher interest debts, improve your home, or take a vacation. With reduced interest rates, you might also be able to build your home equity more quickly by changing to a shorter term mortgage.

Fees and Expenses

Of course, you'll have some fees and expenses during the the refinance process. When you refinance, you are paying for basically the same things you paid for when you got your original mortgage loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You could offer to pay points (prepaid interest) to attain a more favorable rate of interest. Your savings over the life of the loan could be significant if you've paid up front about 3% of the new loan balance. You may be told that these points can be deducted on your income taxes, but since tax regulations are ever-changing, we urge you to speak with a tax professional before depending on this.

An additional expense that borrowers may consider is that a lower rate of interest will lower the interest amount you will deduct from your taxes. We can help you do the math! Call us at 305-967-7200.

Ultimately, for most people the total of initial costs to refinance are made up soon in savings each month. We will help you determine what mortgage program is right for you, considering your cash on hand, the likelihood of selling your home in the next few years, and how refinancing may effect your taxes. Call us at 305-967-7200 to get started.

Curious about refinancing your home? Call us at 305-967-7200.

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