Weighing the Options of Refinancing

Ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate is at least two points lower than your present one? Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing has various advantages that will often make it worth the up-front expenditure a few times over.

Benefits from Refinancing

You might be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with your refinanced mortgage loan. You could also have the ability to "cash out" a portion of the built-up equity in your home, that you can use to take care of higher interest debts, improve your home, or take a vacation. You may have the option to refinance into a shorter-term mortgage loan, giving you the ability to add to your equity quicker.

Expenses and Fees

All of these benefits do cost something, though. With your refinance, you're paying for a lot of the same things you were charged for during your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

You might have to make a penalty payment if you refinance your existing mortgage too soon. It all depends on your present mortgage loan contract. However, some of these penalties apply only to the initial few years of the mortgage loan. We will help you sort through the details: contact us at 941-584-4098.

Doing the Math

You could offer to pay points (prepaid interest) to gain a better rate of interest. The amount you will save over the life of the mortgage may be substantial if you have paid up front about three percent of the new loan total. Please consult a tax professional before acting on rumors that any paid points can be deducted on your taxes.

Speaking of taxes, once you reduce your interest rate, it follows that you will also be lowering the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that some borrowers consider. We can help you do the math! Call us at 941-584-4098.

In the end, for most the amount of up-front costs to refinance will be made up very quickly in savings each month. We can help you find out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at 941-584-4098 to get you started.