Weighing the Options of Refinancing

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Some have said that only in the case your new interest will be at least two points lower, should you refinance your mortgage. That could have been valid a while back, but as refinancing has been costing less over the last few years, it's never the wrong time to think about a new loan! Refinancing has a number of benefits that often make it worth the up-front expenditure a few times over.

Advantages of Refinancing

When you refinance, you might be able to lower your interest rate and monthly payment , perhaps by a lot. You could also be able to "cash out" some of the built-up equity in your home, which you can use to consolidate debts, add on to your home, or plan a vacation. With lower interest rates, you might also get the chance to build your home equity more quickly by switching to a shorter-term loan.

The Cost

All these benefits do come with some expense, though. With your refinance, you are paying for most of the same things you were charged for when you got your existing mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Doing the Math

You could need to pay points (prepaid interest) to gain a better rate of interest. When you pay (on average) 3% of the loan amount up front, your savings for the life of the refinanced loan can be great. Please consult a tax professional before acting on advice that these points paid can be deducted on your federal income taxes.

Another thing about taxes is that when you lower your interest rate, it follows that you'll also be lowering the interest amount that you can deduct from your taxes. This is another cost that some borrowers take into consideration. Call us at 516-431-2009 to help you do the math.

Most people find that the savings each month quickly balance out the up-front cost of refinancing. We'll work with you to determine what program is perfect for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and the effect refinancing will have on your taxes. Call us at 516-431-2009 to get you started.

Curious about refinancing your home? Call us at 516-431-2009.

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