Weighing the Options of Refinancing

Curious about refinancing your home? Call us at 360-576-1920.

Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least two points lower than your present one? That might have been valid a while back, but with refinancing dropping in cost over the last few years, it is never the wrong time to explore the options of a new loan! Refinancing your mortgage loan has various advantages that often make it worth the up-front cost several times over.

Benefits from Refinancing

When you refinance, you may be able to lower the interest rate and mortgage payment , sometimes significantly. You also might have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build your home equity more quickly by moving to a shorter-term mortgage loan.

The Cost

All of these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for at the time you got your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

You may have to make a penalty payment for refinancing your existing mortgage loan too soon. This depends on the rules of your existing mortgage. Some of the penalties just apply to the first couple of years. We'll help you with the details: contact us at 360-576-1920.

Doing the Math

You could need to pay discount points (prepaid interest) to get a better interest rate. If you pay (on average) three percent of the loan amount initially, your savings for the term of the refinanced mortgage can be substantial. Please consult with a tax professional before acting on advice that these points paid can be deducted on your federal income taxes.

Another thing about taxes is that if your interest rate is reduced, naturally you'll also be reducing the interest amount that you can deduct on your taxes. This is one more expense that some borrowers take into account. Call us at 360-576-1920 to help you do the math.

In the end, for most borrowers the amount of initial costs to refinance will be made up very quickly in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 360-576-1920 to get you started.

Searching for mortgage advice? We'll be glad to answer your questions about our mortgage offerings! Call us at 360-576-1920. Ready to begin? Apply Now.

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