Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate is at least two points below your present rate? Maybe that was good advice several years ago, but as refinance costs have been falling recently, it may be time to take a serious look. A refinanced mortgage loan may be worth its cost many times over, considering the benefits that it brings, as well as a lower interest rate.

Benefits from Refinancing

You could be able to lower your interest rate (sometimes by a lot) and make smaller monthly payments with your refinanced mortgage. You also could be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage, giving you the ability to build up your equity quicker.

Expenses and Fees

All these advantages do cost something, though. When you refinance, you are paying for basically the same things you were charged for during your current mortgage. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might investigate paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount initially, your savings for the term of the refinanced loan can be significant. Please consult a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.

One more expense that borrowers may take into account is that a reduced interest rate will reduce the interest amount you will be able to deduct on your taxes. Call us at (407) 898-7559 to help you do the math.

Most borrowers find that the monthly savings quickly balance out the initial cost of a refinance. We'll work with you to find out which mortgage program is best for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing will effect your taxes. Call us at (407) 898-7559 to get started.

Curious about refinancing? Give us a call: (407) 898-7559.

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