Weighing the Options of Refinancing

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It has been said that only when your new interest is at least 2 points below your current rate, should you refinance your mortgage. That might have been valid a while back, but with refinancing dropping in cost recently, it is a good time to think about a new mortgage loan! Refinancing has a number of advantages that often make it worth the up-front expenditure a few times over.

Benefits

When you refinance, you may have the ability to lower the interest rate and monthly payment , sometimes by a lot. Additionally, you could have the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build your home equity more quickly by changing to a shorter-term mortgage.

The Cost

All these benefits do cost something, though. You will be charged the same sort of expenses and fees as you did with your current mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might offer to pay discount points (prepaid interest) to get a better rate of interest. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the refinanced mortgage loan can be significant. You might be told that these points may be deducted on your income taxes, but because tax regulations can be difficult to keep up with, please consult with your tax professional before making any decisions based on this.

One more expense that a borrower may take into account is that a reduced rate of interest will reduce the interest amount you will be able to deduct from your federal income taxes. We can help you do the math! Call us at 603-893-6616.

In the end, for most people the total of up-front costs to refinance are made up soon in savings each month. We can help you find 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 available cash. Call us at 603-893-6616 to get started.

Want to know more about refinancing your home? Give us a call at 603-893-6616.

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