Weighing the Options of Refinancing?

Some have said that only if your new interest will be at least two points lower, should you refinance your mortgage. That may have been true a while back, but with refinancing dropping in cost recently, it's never the wrong time to explore the options of a new mortgage loan! Refinancing your loan has a number of advantages that often make it worth the up-front cost a few times over.

Advantages

You could be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with your refinanced mortgage. Additionally, you could have the option of pulling out some of the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build up home equity more quickly by moving to a shorter-term mortgage.

The Cost

All of these benefits do cost something, though. With your refinance, you're paying for basically the same things you were charged for when you obtained your existing mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

You may be required to make a penalty payment if you refinance your existing loan too soon. It depends on the rules of your current mortgage. However, some of these penalties apply just to the first several years of the mortgage. We will help you figure it out: contact us at (215)741-3131.

Do the Math

You could need to pay discount points (prepaid interest) to gain a better interest rate. If you pay (on average) 3% of the loan amount initially, your savings for the term of the refinanced mortgage loan can be great. You might hear that the points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult a tax professional before considering this in your calculations.

An additional expense that a borrower might take into account is that a reduced rate of interest will lower the interest amount you'll deduct from your taxes. Call us at (215)741-3131 to help you do the math.

Most borrowers find that the savings each month balance out the up-front expenses of a refinance. We'll work with you to determine what program is best for you, taking into account your cash on hand, how likely you are to sell your residence in the near future, and what effect refinancing could have on your taxes. Call us at (215)741-3131 to get you started.

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