Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least two points under your existing rate? That might have been valid years ago, but with refinancing dropping in cost recently, it is never the wrong time to consider a new mortgage loan! A refinance is often worth its cost several times over, because of the benefits that it brings, in addition to a lower interest rate.

Benefits

You might be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced mortgage loan. Additionally, you may have the option of pulling out some of the equity in your home by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage loan, giving you the ability to build your home equity quicker.

Fees and Expenses

As you probably expect, you'll have some fees and expenses during the the refinance process. With your refinance, you're paying for basically the same things you paid for during your original mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying points can result in a better interest rate. When you pay (on average) 3% of the loan amount up front, the savings for the life of the new loan can be great. We recommend that you consult with a tax professional before acting on advice that any paid points may be deducted on your taxes.

Speaking of taxes, once your interest rate is reduced, it follows that you will also be reducing the interest amount that you may deduct from your federal income taxes. This is another expense that some borrowers take into consideration. We can help you do the math! Call us at 218-237-5128.

Most people find that the savings per month quickly balance out the initial expenses of refinancing. We will help you find out which mortgage loan program is best for you, considering your cash on hand, how likely you are to sell your house in the next few years, and what effect refinancing may have on your taxes. Call us at 218-237-5128 to get started.

Curious about refinancing your home? Give us a call: 218-237-5128.

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