Weighing the Options of Renancing

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Weighing the Options of Refinancing

REFINANCING OPTIONS

Some have said that only in the case your new interest is at least 2 points under your current rate, should you refinance your loan. That could have been accurate years ago, but with the fact that refinance has been costing less recently, it’s a good time to consider a new loan! A refinance is often worth its cost many times over, factoring in the benefits that come, as well as a lower interest rate.

Benefits

You might be able to lower your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage. You also could have the option of pulling out some of the equity in your house by “cashing out” some money to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you may also get the chance to build your home equity more quickly by moving to a shorter term mortgage.

The Cost

Of course, you’ll have some fees and expenses during the refinance process. You’ll be charged the same sort of expenses and fees as with your current home loan. Among these can be settlement costs, an appraisal, lender’s title insurance, underwriting expenses, and others.

You could have to make a penalty payment for refinancing your present mortgage loan too soon. It all depends on your existing mortgage agreement. Some of the penalties apply only to the first couple of years. We will help you figure it out: contact us at 847-230-4030.

Doing the Math

You might offer to pay discount points (prepaid interest) to get a better interest rate. The money you will save on the life of the mortgage may be substantial if you’ve paid up front about three percent of the new loan total. You may be told that points can be tax deductible, but since tax regulations are difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.

Another thing about taxes is that once you bring down your interest rate, naturally you will also be lowering the interest amount that you’ll be able to deduct from your federal income taxes. This is one more cost that borrowers consider. Call us at 847-230-4030 to help you do the math.

Most people find that the savings each month quickly outweigh the initial cost of refinancing. We will work with you to determine what mortgage loan program is ideal for you, taking into account 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 847230-4030 to get you started.

Are you looking for a new mortgage? We’ll be glad to answer your questions about your mortgage needs!

Call us at 847-230-4030 or email us at loans@bluestarhm.com.