Weighing the Options of Refinancing

Some have said that only in the case your new interest is at least 2 points lower, should you refinance your mortgage. That might have been valid years ago, but with refinancing dropping in cost over the last few years, it is never the wrong time to consider a new mortgage! A refinanced mortgage is often worth its cost several times over, because of the advantages that can come, as well as a lower interest rate.

Advantages

When you refinance, you could be able to reduce the interest rate and mortgage payment amount, perhaps significantly. Additionally, you might be given the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage program, enabling you to build your home equity faster.

Expenses and Fees

All of these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you were charged for during your original mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

You might have to pay a penalty for refinancing your existing mortgage too soon. It all depends on your existing mortgage loan contract. However, some of these penalties apply just to the first few years of your mortgage loan. We will help you sort through the details: contact us at 970-984-2766.

Doing the Math

You might consider paying points to reduce your interest rate. The amount you will save over the life of the loan might be substantial if you've paid up front about three percent of the new loan balance. We recommend that you consult a tax professional before acting on hear-say that these paid points may be deducted on your taxes.

One more expense that a borrower may consider is that a reduced rate of interest will reduce the interest amount you will deduct on your federal income taxes. Call us at 970-984-2766 to help you do the math.

Ultimately, for most borrowers the total of initial costs to refinance will be made up very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your cash on hand. Call us at 970-984-2766 to get you started.