Weighing the Options of Refinancing

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It has been said that only in the case your new interest is at least two points lower, should you refinance your loan. That may have been valid years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to consider a new mortgage! Refinancing your loan has a variety of advantages that often make it worth the up-front cost a few times over.

Benefits

When you refinance, you could have the ability to reduce your interest rate and monthly payment amount, sometimes by a lot. Additionally, you might have the option of tapping into the equity in your home by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With lower rates, you may also be able to build your home equity faster by moving to a shorter term mortgage loan.

The Cost

All these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you were charged for during your current mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might offer to pay points (prepaid interest) to attain a more favorable rate of interest. When you pay (on average) 3% of the mortgage loan amount initially, your savings for the term of the refinanced mortgage can be great. You may be told that these points may be deducted on your income taxes, but as tax regulations are difficult to keep up with, we urge you to consult with a tax professional before considering this in your calculations.

Speaking of taxes, if your interest rate is lowered, naturally you will also be lowering the paid interest amount that you may deduct on your federal income taxes. This is one more expense that borrowers consider. We can help you do the math! Call us at 425-508-9988.

Ultimately, for most the total of initial costs to refinance will be paid back very quickly in monthly savings. We will work with you to determine which mortgage program is the right fit for you, taking into account your cash on hand, the likelihood of selling your residence in the near future, and how refinancing might effect your taxes. Call us at 425-508-9988 to get started.

Want to know more about refinancing? Give us a call at 425-508-9988.

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