Weighing the Options of Refinancing

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Ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points lower than your current rate? That could have been true years ago, but with refinancing dropping in cost recently, it is a good time to consider a new mortgage loan! Refinancing your mortgage loan has some benefits that can make it worth the initial cost a few times over.

Advantages

You could be able to lower your interest rate (sometimes by a lot) and make smaller monthly payments with your refinanced mortgage loan. You could also have the option to "cash out" a portion of your home equity, that you will be able use to consolidate debt, add on to your home, or finance a vacation. With lower interest rates, you might also be able to build up home equity faster by moving to a shorter term mortgage loan.

The Cost

Of course, you'll have some fees and expenses during your the refinance process. You will have to pay the same kinds of expenses and fees as you did with your current home loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

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

Speaking of taxes, once you bring down your interest rate, of course you'll also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at 512-302-9410.

Most people find that the monthly savings outweigh the initial expenses of refinancing. We can help you figure out your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 512-302-9410 to get you started.

Curious about refinancing your home? Call us at 512-302-9410.

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