Weighing the Options of Refinancing

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Some have said that only if your new interest will be at least two points lower, should you refinance your loan. Perhaps that was sound advice several years ago, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing your mortgage has a variety of advantages that can make it worth the up-front cost several times over.

Benefits

You could be able to lower your interest rate (sometimes by a lot) and have smaller monthly payments with a refinanced loan. You also might be given the option of tapping into your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You might have the option to refinance into a shorter-term mortgage, enabling you to build up your home equity quicker.

Expenses and Fees

As you probably expect, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for a lot of the same things you were charged for during your existing mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might consider paying points to be given a lower interest rate. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the refinanced loan can be substantial. We recommend that you consult a tax professional before acting on advice that any points paid may be deducted on your taxes.

Another thing about taxes is that when your interest rate is lowered, naturally you will also be reducing the interest amount that you can deduct on your taxes. This is one more cost that some borrowers take into consideration. Call us at 425-508-9988 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the up-front cost of refinancing. We can help you figure out your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at 425-508-9988 to get you started.

Want to know more about refinancing? Call us at 425-508-9988.

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