Weighing the Options of Refinancing

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Some have said that only when your new interest will be at least two points under your current rate, should you refinance your mortgage. Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing your mortgage loan has various advantages that can make it worth the initial expenditure many times over.

Advantages

You might be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced mortgage. Additionally, you might have the option of tapping into the equity in your property by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also get the chance to build your home equity more quickly by changing to a shorter-term loan.

Fees and Expenses

As you probably know, you'll have some fees and expenses during the process of refinancing. With your refinance, you are paying for a lot of the same things you paid for during your original mortgage. Included in your costs might 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 gain a more favorable rate of interest. Your savings on the life of the loan might be significant if you've paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on hear-say that the points paid can be deducted on your federal income taxes.

Another cost that a borrower may take into account is that a reduced interest rate will reduce the interest amount you will be able to deduct on your federal income taxes. Call us at 720-598-8300 to help you do the math.

Most people find that the monthly savings balance out the initial cost of a refinance. We can help you find out what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at 720-598-8300 to get started.

Want to know more about refinancing your home? Call us: 720-598-8300.

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