Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least two points under your existing rate? Perhaps that was good advice several years ago, but since refinance costs have been getting lower, it could be a good time to look into it. A refinanced loan can be worth its cost several times over, factoring in the advantages that may come, in addition to a lower interest rate.

Advantages

You could be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced loan. You could also have the ability to "cash out" some of your home equity, which you may use to consolidate debt, add on to your home, or plan a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to build up your home equity quicker.

The Cost

Of course, you will have to pay for the process of refinancing. When you refinance, you're paying for basically the same things you paid for during your original mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Do the Math

You could need to pay discount points (prepaid interest) to get a better rate of interest. When you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the new mortgage can be substantial. You might be told that the 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 depending on this.

Another expense that a borrower might take into account is that a lower interest rate will lower the interest amount you will be able to deduct on your taxes. Call us at (512) 422-9036 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the initial cost of refinancing. We will help you figure out which mortgage loan program is ideal for you, taking into account your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing could have on your taxes. Call us at (512) 422-9036 to get you started.

Curious about refinancing? Give us a call: (512) 422-9036.

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