Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least two points lower than your existing rate? That might have been true years ago, but with refinancing dropping in cost over the last few years, it is a good time to think about a new loan! Refinancing your mortgage loan has a number of benefits that often make it worth the initial expenditure a few times over.

Benefits from Refinancing

You could be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced loan. You also may have the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You could have the option to refinance into a shorter-term mortgage loan, enabling you to build up your home equity faster.

Fees and Expenses

Of course, you will have to pay for your process of refinancing. With your refinance, you're paying for many of the same things you paid for during your current mortgage. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Do the Math

You might need to pay points (prepaid interest) to gain a better interest rate. Your savings over the life of the mortgage could be substantial if you have paid up front about three percent of the new loan balance. You might be told that these points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, please consult your tax professional before depending on this.

One more cost that a borrower might consider is that a reduced rate of interest will lower the interest amount you will be able to deduct on your federal income taxes. We can help you do the math! Call us at (610) 889-7467.

In the end, for most the amount of up-front costs to refinance are made up very quickly in monthly savings. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (610) 889-7467 to get you started.

Curious about refinancing your home? Give us a call at (610) 889-7467.

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