Weighing the Options of Refinancing

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least 2 points below your present one? Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it could be time to look into it. A refinance may be worth its cost several times over, factoring in the advantages that can come, along with a reduced interest rate.

Advantages

When you refinance, you could be able to reduce the interest rate and mortgage payment , sometimes considerably. You also may have the option of tapping into the equity in your property by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build up your home equity faster.

The Cost

As you probably know, you'll have to pay for your the refinance process. You'll have the same sort of expenses and fees as with your existing mortgage. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might look into paying points to receive a lower interest rate. When you pay (on average) three percent of the mortgage loan amount up front, your savings for the life of the new mortgage loan can be significant. We recommend that you talk to a tax professional before acting on hear-say that the points paid can be deducted on your taxes.

Another thing about taxes is that if you bring down your interest rate, of course you will also be reducing the interest amount that you will be able to deduct on your federal income taxes. This is one more expense that some borrowers take into account. Call us at (919) 771-3379 to help you do the math.

In the end, for most the total of initial costs to refinance are made up soon in savings each month. We can help you explore your options, 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 (919) 771-3379 to get started.

Curious about refinancing? Call us: (919) 771-3379.