Weighing the Options of Refinancing

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Ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least two points lower than your present one? Maybe that was sound advice several years ago, but since refinance costs have been falling recently, it may be a good time to look into it. Refinancing has a variety of advantages that can make it worth the initial cost several times over.

Benefits

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

Expenses and Fees

Of course, you will have some fees and expenses during the process of refinancing. With your refinance, you are paying for a lot of the same things you were charged for during your current mortgage loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Doing the Math

You might investigate paying points to be given a better interest rate. When you pay (on average) 3% of the loan amount at the start, the savings for the life of the refinanced mortgage can be significant. You might hear that points can be deducted on your income taxes, but since tax regulations are difficult to keep up with, we urge you to consult a tax professional before making decisions based on this.

Speaking of taxes, if you reduce your interest rate, of course you will also be lowering the paid interest amount that you may deduct on your federal income taxes. This is another expense that some borrowers take into account. We can help you do the math! Call us at 248-644-1200.

In the end, for most the amount of up-front costs to refinance are paid back very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your cash on hand. Call us at 248-644-1200 to get started.

Curious about refinancing your home? Call us: 248-644-1200.

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