Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points lower than your existing rate? Perhaps that was good advice a number of years ago, but as refinance costs have been getting lower, it may be time to look into it. A refinanced mortgage loan is often worth its cost several times over, because of the advantages that can come, in addition to a lower interest rate.

Advantages

When you refinance, you might have the ability to reduce your interest rate and mortgage payment amount, perhaps considerably. You might also be able to "cash out" some of the built-up equity in your home, that you are able use to take care of higher interest debts, improve your home, or take a vacation. You could have the option to refinance into a shorter-term mortgage program, giving you the ability to build your equity quicker.

Fees and Expenses

As you probably expect, you'll have some fees and expenses during the process of refinancing. With your refinance, you are paying for basically the same things you were charged for when you got your existing mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Doing the Math

Paying discount points can help you attain a lower interest rate. Your savings over the life of the loan might be substantial if you've paid up front about 3% of the new loan total. You might be told that the points can be tax deductible, but because tax regulations are difficult to keep up with, please consult with a tax professional before making decisions based on this.

Speaking of taxes, if your interest rate is reduced, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that some borrowers take into account. Call us at 720-598-8300 to help you do the math.

Most people find that the savings per month quickly balance out the up-front cost of a refinance. We will help you find out which mortgage loan program is right for you, considering your cash on hand, the likelihood of selling your home in the near future, and how refinancing might effect your taxes. Call us at 720-598-8300 to get started.

Curious about refinancing? Give us a call: 720-598-8300.

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