Weighing the Options of Refinancing

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It has been said that only when your new interest is at least 2 points below your current rate, should you refinance your loan. That could have been valid years ago, but since refinancing has been costing less recently, it's a good time to think about a new loan! A refinanced mortgage can be worth its cost many times over, factoring in the benefits that may come, as well as a reduced interest rate.

Benefits from Refinancing

You could be able to bring down your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced mortgage. You may also be able to "cash out" a portion of the built-up equity in your home, which you may use to consolidate debt, add on to your home, or plan a vacation. With reduced interest rates, you may also get the chance to build your home equity more quickly by moving to a shorter-term loan.

Fees and Expenses

Of course, you'll have some fees and expenses during your process of refinancing. When you refinance, you're paying for basically the same things you paid for during your original mortgage loan. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might consider paying points to get a better interest rate. When you pay (on average) three percent of the mortgage loan amount at the start, your savings for the term of the refinanced mortgage can be substantial. You might have heard that the points can be tax deductible, but since tax regulations can be difficult to keep up with, we urge you to speak with your tax professional before considering this in your calculations.

An additional cost that borrowers may consider is that a reduced rate of interest will reduce the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at 504-866-5626.

Most people find that the monthly savings quickly outweigh the initial expenses of refinancing. We can help you explore what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at 504-866-5626 to get started.

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

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