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Weighing the Options of Refinancing

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It has been said that only when your new interest is at least two points under your current rate, should you refinance your mortgage. That might have been accurate a while back, but with refinancing dropping in cost recently, it's a good time to explore the options of a new loan! A refinanced mortgage may be worth its cost many times over, considering the advantages that can come, along with a lower interest rate.

Advantages

You could be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage. You also could have the option of pulling out some of your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you may also get the chance to build your home equity faster by changing to a shorter term loan.

The Cost

Of course, you'll have to pay for your the refinance process. With your refinance, you're paying for basically the same things you paid for during your existing mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Doing the Math

You might need to pay points (prepaid interest) to gain a lower rate of interest. Your savings on the life of the loan might be significant if you have paid up front about 3% of the new loan balance. You might have heard that these points can be tax deductible, but as tax regulations are ever-changing, we urge you to speak with a tax professional before depending on this.

Another expense that borrowers might take into account is that a lower interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at 516-431-2009 to help you do the math.

Most borrowers find that the savings each month quickly balance out the initial cost of a refinance. We can help you figure out what your options are, considering the effect a refinance could 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 516-431-2009 to get started.

Curious about refinancing your home? Give us a call: 516-431-2009.

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