Weighing the Options of Refinancing

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least 2 points lower than your current rate? Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it may be time to take a serious look. A refinance is often worth its cost several times over, considering the advantages that come, as well as a reduced interest rate.


You might be able to lower your interest rate (sometimes by a lot) and have smaller monthly payments with a refinanced mortgage. Additionally, you might have the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage loan, enabling you to build your home equity quicker.

The Cost

Of course, you will have some fees and expenses during your process of refinancing. You'll pay the same types of expenses and fees as you did with your current mortgage. These could include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Doing the Math

You could need to pay points (prepaid interest) to get a better interest rate. The money you'll save over the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan balance. You may hear that the points can be tax deductible, but as tax regulations can be difficult to keep up with, please speak with a tax professional before depending on this.

One more expense that a borrower might consider is that a reduced interest rate will reduce the interest amount you will be able to deduct on your taxes. Call us at 5122916100 to help you do the math.

All things considered, for most borrowers the total of up-front costs to refinance are paid back very quickly in monthly savings. We'll help you find out which program is ideal for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and the effect refinancing will probably have on your taxes. Call us at 5122916100 to get started.

Curious about refinancing your home? Give us a call at 5122916100.

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