Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that states you should only refinance if the new interest rate is at least two points under your present rate? That could have been true a while back, but with refinancing dropping in cost recently, it is never the wrong time to consider a new loan! A refinanced mortgage loan can be worth its cost many times over, considering the benefits that it brings, along with a lower interest rate.

Benefits

You might be able to lower your interest rate (sometimes substantially) and make smaller monthly payments with your refinanced mortgage. Additionally, you may be given the option of pulling out some of your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build up home equity faster by moving to a shorter term loan.

The Cost

All of these benefits do cost something, though. You will have to pay the same types of expenses and fees as you did with your current mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

You might offer to pay discount points (prepaid interest) to gain a lower interest rate. When you pay (on average) three percent of the loan amount up front, the savings for the term of the new loan can be significant. We recommend that you consult a tax professional before acting on hear-say that these paid points can be deducted on your federal income taxes.

Another thing about taxes is that when you lower your interest rate, naturally you will also be reducing the interest amount that you can deduct from your taxes. This is another expense that some borrowers take into consideration. We can help you do the math! Call us at (440) 234-9660.

Ultimately, for most people the total of up-front costs to refinance are made up soon in monthly savings. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (440) 234-9660 to get started.

Curious about refinancing your home? Call us at (440) 234-9660.

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