Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least 2 points lower than your current rate? Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing has various advantages that often make it worth the up-front expenditure many times over.


You may be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced loan. You might also be able to "cash out" some of the built-up equity in your home, which you are able use to take care of higher interest debts, improve your home, or plan a vacation. With reduced rates, you might also be able to build up home equity faster by changing to a shorter term mortgage.

Fees and Expenses

All these benefits do come with some expense, though. When you refinance, you are paying for most of the same things you paid for when you got your current mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might consider paying points to be given a reduced interest rate. When you pay (on average) three percent of the loan amount at the start, the savings for the term of the new mortgage loan can be significant. You might have heard that these points can be tax deductible, but as tax regulations are difficult to keep up with, we urge you to consult your tax professional before making any decisions based on this.

Speaking of taxes, once your interest rate is reduced, naturally you will also be lowering the interest amount that you can deduct from your taxes. This is one more cost that borrowers consider. Call us at 2147187183 to help you do the math.

Most borrowers find that the savings per month quickly balance out the initial cost of a refinance. We will help you determine which mortgage program is best for you, looking at your cash on hand, how likely you are to sell your home in the next few years, and how refinancing might effect your taxes. Call us at 2147187183 to get started.

Curious about refinancing? Give us a call at 2147187183.