Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points under your current one? Perhaps several years ago that was sage advice, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing your mortgage loan has various advantages that often make it worth the up-front cost several times over.

Benefits from Refinancing

You might be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with a refinanced loan. You could also have the ability to "cash out" a portion of the built-up equity in your residence, that you can use to consolidate debt, improve your home, or finance a vacation. With reduced interest rates, you might also be able to build your home equity faster by changing to a shorter term loan.

Fees and Expenses

Of course, you'll have to pay for your process of refinancing. You will pay the same kinds of expenses and fees as you did with your current home loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You could offer to pay points (prepaid interest) to get a more favorable rate of interest. The amount you'll save on the life of the loan might be substantial if you've paid up front about three percent of the new loan total. You might be told that the points may be tax deductible, but since tax regulations are ever-changing, we urge you to speak with a tax professional before considering this in your calculations.

Speaking of taxes, when your interest rate is lowered, naturally you will also be reducing the paid interest amount that you will be able to deduct from your federal income taxes. This is another expense that borrowers take into account. Call us at 503-631-3311 to help you do the math.

All things considered, for most the total of up-front costs to refinance are made up soon in monthly savings. We'll help you determine which mortgage loan program is right for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing may effect your taxes. Call us at 503-631-3311 to get started.

Want to know more about refinancing your home? Give us a call at 503-631-3311.