Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate is at least 2 points lower than your current rate? That may have been true a while back, but as refinancing has been costing less in recent years, it's never the wrong time to consider a new mortgage! Refinancing your mortgage has various advantages that often make it worth the initial expenditure several times over.

Benefits

When you refinance, you could have the ability to reduce your interest rate and monthly payment , sometimes considerably. You may also have the option to "cash out" some of your equity, that you may use to take care of higher interest debts, add on to your home, or finance a vacation. With reduced rates, you may also get the chance to build your home equity more quickly by moving to a shorter term loan.

The Cost

All of these advantages do come with some expense, though. You'll have to pay the same types of fees as with your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying discount points can result in a lower interest rate. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the refinanced mortgage loan can be significant. We recommend that you consult with a tax professional before acting on hear-say that the points paid may be deducted on your taxes.

Another thing about taxes is that once you bring down your interest rate, it follows that you'll also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is another cost that some borrowers consider. We can help you do the math! Call us at 972.798.2110.

In the end, for most people the amount of initial costs to refinance are paid back very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your money on hand. Call us at 972.798.2110 to get started.

Curious about refinancing your home? Call us at 972.798.2110.


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