Weighing the Options of Refinancing

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Some have said that only when your new interest is at least 2 points below your current rate, should you refinance your loan. That might have been valid years ago, but with refinancing dropping in cost recently, it's a good time to consider a new mortgage loan! Refinancing has various advantages that often make it worth the initial expenditure several times over.

Benefits from Refinancing

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

Expenses and Fees

As you probably know, you will have some fees and expenses during the the refinance process. You will have the same sort of fees as with your present home loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

Paying discount points can help you attain a better interest rate. If you pay (on average) 3% of the mortgage loan amount up front, the savings for the term of the new mortgage can be great. You might have heard that points may be deducted on your income taxes, but because tax regulations are ever-changing, please consult your tax professional before making decisions based on this.

Another expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you will be able to deduct from your federal income taxes. Call us at 504-866-5626 to help you do the math.

In the end, for most people the amount of initial costs to refinance will be made up soon in savings each month. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 504-866-5626 to get you started.

Want to know more about refinancing your home? Give us a call: 504-866-5626.

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