Weighing the Options of Refinancing

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Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least two points under your current one? That could have been accurate years ago, but since refinancing has been costing less recently, it is never the wrong time to think about a new mortgage! Refinancing your loan has a variety of benefits that will often make it worth the up-front expenditure a few times over.

Advantages

When you refinance, you may be able to reduce your interest rate and mortgage payment amount, sometimes by a lot. Additionally, you could be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage, enabling you to add to your equity faster.

Fees and Expenses

Of course, you will have some fees and expenses during the process of refinancing. With your refinance, you're paying for many of the same things you were charged for when you got your original mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might offer to pay discount points (prepaid interest) to get a more favorable rate of interest. Your savings on the life of the mortgage could be substantial if you've paid up front about 3% of the new loan balance. You might have heard that these points can be tax deductible, but because tax regulations are ever-changing, please consult a tax professional before considering this in your calculations.

Speaking of taxes, once you lower your interest rate, it follows that you will also be lowering the interest amount that you may deduct on your federal income taxes. This is one more expense that some borrowers take into account. Call us at (440) 234-9660 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the up-front cost of refinancing. We'll work with you to figure out which mortgage loan program is right for you, considering your cash on hand, how likely you are to sell your house in the next few years, and the effect refinancing could have on your taxes. Call us at (440) 234-9660 to get started.

Want to know more about refinancing? Call us: (440) 234-9660.

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