Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate is at least two points under your present one? Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it could be a good time to take a serious look. A refinanced loan may be worth its cost several times over, because of the advantages that it brings, in addition to a reduced interest rate.

Advantages

When you refinance, you may be able to lower your interest rate and mortgage payment amount, sometimes significantly. You also might have 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. With lower rates, you might also be able to build your home equity faster by changing to a shorter term loan.

The Cost

As you probably know, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for a lot of the same things you paid for during your existing mortgage. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

Paying points can get you a better interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, the savings for the term of the new mortgage can be great. You might hear that these points can be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please consult a tax professional before considering this in your calculations.

Another expense that borrowers may take into account is that a reduced rate of interest will lower the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at (334) 285-8850.

All things considered, for most the amount of up-front costs to refinance are paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (334) 285-8850 to get you started.

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

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