Weighing the Options of Refinancing

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Ever hear the old rule of thumb that says you should only consider refinancing 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 falling recently, it could be time to look into it. Refinancing has various advantages that will often make it worth the initial expenditure a few times over.

Benefits

When you refinance, you might be able to reduce your interest rate and mortgage payment amount, perhaps considerably. You also might be given the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage, giving you the ability to build up your home equity faster.

Fees and Expenses

All of these advantages do cost something, though. You will pay the same sort of expenses and fees as with your present mortgage. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might think about paying points to reduce your interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, the savings for the term of the new mortgage loan can be substantial. You may be told that these points can be deducted on your income taxes, but because tax regulations are ever-changing, we urge you to speak with a tax professional before depending on this.

Another thing about taxes is that when you bring down your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that some borrowers take into account. Call us at 954.920.9799 to help you do the math.

All things considered, for most borrowers the amount of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 954.920.9799 to get started.

Curious about refinancing your home? Give us a call: 954.920.9799.

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