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 two points lower, should you refinance your mortgage. Maybe several years ago that was good advice, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing has some benefits that will often make it worth the up-front cost several times over.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with a refinanced loan. You might also have the option to "cash out" a portion of the built-up equity in your home, that you may use to take care of higher interest debts, add on to your home, or finance a vacation. You may be able to refinance into a shorter-term mortgage, giving you the ability to add to your home equity faster.

Fees and Expenses

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

Doing the Math

You could offer to pay discount points (prepaid interest) to gain a more favorable rate of interest. Your savings over the life of the mortgage could be significant if you've paid up front about 3% of the new loan total. Please consult with a tax professional before acting on hear-say that any paid points may be deducted on your taxes.

An additional cost that borrowers may take into account is that a lower interest rate will reduce the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at (334) 285-8850.

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

Want to know more about refinancing your home? Call us at (334) 285-8850.

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