Weighing the Options of Refinancing

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Ever hear the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points below your existing rate? Maybe that was good advice a number of years ago, but as refinance costs have been falling recently, it may be a good time to take a serious look. A refinance is often worth its cost many times over, because of the advantages that can come, as well as a reduced interest rate.

Benefits from Refinancing

You may be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage loan. Additionally, you might have the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also be able to build your home equity more quickly by moving to a shorter-term mortgage.

Fees and Expenses

As you probably know, you will have to pay for your the refinance process. When you refinance, you are paying for many of the same things you paid for at the time you got your existing mortgage loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might investigate paying points to get a lower interest rate. Your savings on the life of the mortgage might be substantial if you have paid up front about 3% of the new loan balance. You may be told that the points can be tax deductible, but since tax regulations are ever-changing, please consult with your tax professional before considering this in your calculations.

Another thing about taxes is that if you reduce your interest rate, of course you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at (303) 300-8601.

In the end, for most people the total of up-front costs to refinance will be made up very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at (303) 300-8601 to get you started.

Curious about refinancing your home? Give us a call at (303) 300-8601.

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