Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points below your current rate? That might have been accurate years ago, but with refinancing dropping in cost recently, it's never the wrong time to consider a new mortgage loan! Refinancing your mortgage has some advantages that can make it worth the up-front expenditure many times over.

Benefits from Refinancing

You might be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with your refinanced loan. You might also be able to "cash out" a portion of the built-up equity in your home, that you are able use to take care of higher interest debt, make home improvements, or take a vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter term loan.

Fees and Expenses

As you probably know, you will have to pay for the the refinance process. You'll have to pay the same sort of expenses and fees as with your existing mortgage. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You might need to pay discount points (prepaid interest) to gain a lower rate of interest. The money you'll save on the life of the loan could be significant if you've paid up front about three percent of the new loan balance. Please consult with a tax professional before acting on hear-say that any paid points may be deducted on your taxes.

One more expense that a borrower might take into account is that a lower interest rate will reduce the interest amount you'll be able to deduct from your federal income taxes. We can help you do the math! Call us at 812-945-4400.

Most borrowers find that the savings per month balance out the initial expenses of refinancing. We can help you find out your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at 812-945-4400 to get started.

Want to know more about refinancing? Call us: 812-945-4400.

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