Weighing the Options of Refinancing

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Some have said that only when your new interest is at least 2 points under your current rate, should you refinance your mortgage. Maybe that was sound advice a number of years ago, but since refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing has some benefits that will often make it worth the initial expenditure many times over.

Advantages of Refinancing

You could be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage loan. Additionally, you may have the option of pulling out some of the equity in your property by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage program, enabling you to build your equity quicker.

Expenses and Fees

As you probably expect, you will have some fees and expenses during the process of refinancing. You'll have to pay the same kinds of fees as you did with your existing mortgage loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You might need to pay discount points (prepaid interest) to attain a more favorable rate of interest. When you pay (on average) three percent of the loan amount initially, your savings for the term of the refinanced mortgage can be substantial. Please consult with a tax professional before acting on hear-say that any paid points may be deducted on your taxes.

Another thing about taxes is that when you bring down your interest rate, of course you will also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is another expense that some borrowers take into account. Call us at (334) 285-8850 to help you do the math.

Most people find that the monthly savings quickly balance out the initial cost of refinancing. We can help you explore your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at (334) 285-8850 to get started.

Want to know more about refinancing? Give us a call: (334) 285-8850.

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