Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points lower than your current rate? Perhaps several years ago that was wise advice, but since refinance costs have been falling recently, it may be a good time to look into it. Refinancing has some advantages that will often make it worth the initial cost several times over.

Advantages of Refinancing

When you refinance, you might be able to reduce the interest rate and mortgage payment , sometimes significantly. Additionally, you might be given the option of tapping into your home equity by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. You may be able to refinance into a shorter-term mortgage, enabling you to add to your home equity quicker.

The Cost

All these benefits do come with some expense, though. You'll be charged the same types of fees as you did with your present home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to be given a better interest rate. The amount you'll save over the life of the mortgage may be significant if you have paid up front about three percent of the new loan balance. You might have heard that points may be deducted on your income taxes, but because tax regulations are ever-changing, we urge you to speak with a tax professional before making decisions based on this.

Another cost that a borrower may take into account is that a lower interest rate will lower the interest amount you'll be able to deduct from your taxes. We can help you do the math! Call us at 703-288-0777.

Most borrowers find that the savings per month balance out the up-front cost of refinancing. We will work with you to figure out what mortgage program is perfect for you, looking at 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 703-288-0777 to get started.

Want to know more about refinancing? Give us a call: 703-288-0777.

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