Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that states you should only refinance if your new interest rate is at least 2 points below your current rate? Perhaps several years ago that was sage advice, but since refinance costs have been getting lower, it could be time to take a serious look. Refinancing has various benefits that often make it worth the initial expenditure several times over.

Advantages of Refinancing

When you refinance, you might have the ability to reduce your interest rate and monthly mortgage payment , sometimes considerably. Additionally, you could be given the option of pulling out some of the equity in your home by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also be able to build your home equity more quickly by switching to a shorter-term loan.

Expenses and Fees

Of course, you will have to pay for your the refinance process. When you refinance, you are paying for basically the same things you were charged for when you obtained your original mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

You could offer to pay discount points (prepaid interest) to gain a more favorable interest rate. If you pay (on average) three percent of the loan amount initially, the savings for the term of the refinanced loan can be significant. Please consult a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.

An additional cost that borrowers may consider 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 718-441-7000.

Most borrowers find that the monthly savings quickly balance out the up-front cost of a refinance. We can help you find out your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at 718-441-7000 to get you started.

Want to know more about refinancing? Call us at 718-441-7000.

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