Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least two points lower than your present rate? Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it may be time to look into it. Refinancing has various benefits that can make it worth the initial cost many times over.

Benefits from Refinancing

You might be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. Additionally, you might have the option of tapping into the equity in your home by "cashing out" a sum of money 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 add to your equity quicker.

The Cost

As you probably know, you'll have to pay for your the refinance process. When you refinance, you are paying for basically the same things you were charged for during your existing mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying discount points can result in a better interest rate. When you pay (on average) three percent of the loan amount at the start, the savings for the life of the new mortgage can be great. You may have heard that points may be deducted on your income taxes, but as tax regulations can be ever-changing, we urge you to consult with a tax professional before making decisions based on this.

Another cost that a borrower may consider is that a lower interest rate will reduce the interest amount you'll be able to deduct from your taxes. Call us at 816-554-9696 to help you do the math.

Ultimately, for most people the total of initial costs to refinance will be paid back very quickly in monthly savings. We will work with you to figure out which mortgage program is perfect for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and how refinancing can effect your taxes. Call us at 816-554-9696 to get started.

Curious about refinancing your home? Call us at 816-554-9696.

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