Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least two points under your existing one? Maybe that was good advice several years ago, but since refinance costs have been falling recently, it could be a good time to look into it. Refinancing has a variety of advantages that can make it worth the up-front cost several times over.

Benefits

When you refinance, you may be able to reduce your interest rate and monthly mortgage payment amount, perhaps significantly. You could also have the ability to "cash out" a portion of your equity, that you may use to take care of higher interest debts, add on to your home, or plan a vacation. You could have the option to refinance to a shorter-term mortgage loan, enabling you to build your home equity faster.

The Cost

As you probably know, you'll have some fees and expenses during your the refinance process. You'll pay the same types of expenses and fees as with your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could need to pay discount points (prepaid interest) to gain a better interest rate. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the term of the refinanced loan can be significant. You may have heard that these points can be tax deductible, but as tax regulations can be ever-changing, we urge you to speak with your tax professional before depending on this.

Speaking of taxes, when your interest rate is lowered, it follows that you will also be reducing the interest amount that you will be able to deduct on your taxes. This is another cost that borrowers consider. Call us at 724-933-9070 to help you do the math.

Most borrowers find that the monthly savings outweigh the initial expenses of a refinance. We'll help you find out which loan program is perfect for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and the effect refinancing will probably have on your taxes. Call us at 724-933-9070 to get started.

Curious about refinancing? Call us: 866-313-0412.