Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least 2 points under your present rate? Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it may be time to take a serious look. A refinance can be worth its cost several times over, because of the advantages that it brings, as well as a lower interest rate.

Benefits

You could be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with your refinanced mortgage loan. You also might be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage loan, enabling you to add to your home equity faster.

The Cost

All these advantages do cost something, though. When you refinance, you are paying for many of the same things you were charged for during your current mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might think about paying points to get a reduced interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, the savings for the term of the new loan can be significant. We recommend that you consult with a tax professional before acting on rumors that any points paid may be deducted on your taxes.

Another expense that a borrower might take into account is that a reduced interest rate will lower the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at (816) 525-8000.

Most people find that the savings each month quickly outweigh the up-front cost of refinancing. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (816) 525-8000 to get started.

Curious about refinancing your home? Call us: (816) 525-8000.

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