Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate is at least two points below your present one? That could have been sound advice years ago, but since refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! Refinancing your mortgage loan has a number of benefits that will often make it worth the up-front cost a few times over.

Advantages

You could be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced mortgage loan. Additionally, you may have the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build your home equity faster by changing to a shorter term mortgage.

The Cost

As you probably expect, you'll have some fees and expenses during the the refinance process. When you refinance, you are paying for basically the same things you paid for during your existing mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might consider paying points to get a reduced interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, the savings for the term of the new mortgage loan can be substantial. Please talk to a tax professional before acting on hear-say that any points paid can be deducted on your taxes.

An additional expense that borrowers might take into account is that a reduced interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at (707) 252-2700 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the up-front expenses of a refinance. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (707) 252-2700 to get started.

Want to know more about refinancing your home? Call us at (707) 252-2700.

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