Weighing the Options of Refinancing

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It has been said that only in the case your new interest will be at least 2 points lower, should you refinance your mortgage. Perhaps that was good advice a number of years ago, but as refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing has various advantages that can make it worth the up-front cost many times over.

Advantages

You might be able to lower your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced loan. You could also have the option to "cash out" some of your home equity, that you may use to consolidate debt, make home improvements, or finance a vacation. With reduced rates, you may also be able to build your home equity faster by changing to a shorter term loan.

The Cost

Of course, you'll have some fees and expenses during your the refinance process. When you refinance, you are paying for a lot of the same things you paid for when you got your original mortgage loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

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

Speaking of taxes, when your interest rate is reduced, of course you will also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is another expense that some borrowers consider. We can help you do the math! Call us at (407) 898-7559.

All things considered, for most people the total of initial costs to refinance will be paid back very quickly in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at (407) 898-7559 to get started.

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

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