Refinancing

When To Refinance

ADVANTAGES TO REFINANCING

When you refinance, you may have the ability to reduce your interest rate and monthly mortgage payment, sometimes by a lot. You might also have the option of tapping into the equity in your home by "cashing out" some money 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 program, enabling you to add to your home equity quicker.

FEE'S + EXPENSES

All of these advantages do cost something, though. When you refinance, you are paying for most 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. THE TOTAL FINANCE CHARGES MAY BE HIGHER OVER THE LIFE OF THE LOAN.

DOING THE MATH

Paying discount points can help you attain a lower interest rate. Your savings over the life of the mortgage loan may be substantial if you've paid up front about 3% of the new loan total. You may hear that these points can be deducted on your income taxes, but as tax regulations can be ever-changing, please consult a tax professional before considering this in your calculations.

An additional expense that borrowers might take into account is that a lower rate of interest will lower the interest amount you'll deduct on your federal income taxes. We can help you do the math! Most borrowers find that the savings per month quickly outweigh the up-front expenses of a refinance. We'll work with you to determine what loan program is the ideal fit for you, looking at your cash on hand, how likely you are to sell your house in the next few years, and what effect refinancing will have on your taxes.

Refinancing Options

Lowering Your Payments

Are you refinancing primarily to lower your interest rate and monthly payments? In that case, a low, fixed rate loan may be the ideal choice for you. Perhaps you are currently in a loan with a high, fixed interest rate, or a mortgage loan in which the rate of interest varies - an adjustable rate mortgage (ARM). Even when rates rise later, unlike with your ARM, when you qualify for a fixed rate mortgage, you set that low interest rate for the life of your loan. A fixed-rate mortgage is especially a wise idea if you don't think you'll be selling your home within the next five years or so. However, an ARM with a low initial payment may be a better way to lower your mortgage payments if you expect to move in the next few years.

Cashing Out

Are you planning to cash out some of the equity in your home with your refinance? Perhaps you need to make home improvements, pay your child's college tuition bill, or take a cruise. With this in mind, you'll want to get a loan above the balance remaining on your existing mortgage loan. If you've had your existing mortgage for a long time and/or have a mortgage loan whose interest rate is high, you may be able to do this without making your mortgage payment bigger.

Consolidating Debt

Do you want to pull out some equity to consolidate additional debt? Great idea! If you have the right amount of home equity you may be able to pay off higher interest debt, like credit cards or vehicle loans,

with a lower rate refinance mortgage loan.

Shorten Your Mortgage Term

Are you dreaming of paying your loan off more quickly, while building up your home equity quicker? If so, you should consider refinancing to a shorter-term loan, such as a 15-year mortgage loan. You will be paying less interest and growing your home equity more quickly, even though your mortgage payments will generally be bigger than you have been paying. But you might be able to make the change without a higher monthly mortgage payment if your long-term mortgage was closed a while back, and the balance remaining is low enough. You may even make it lower! To help you figure out your options and the multiple benefits in refinancing, please call us! We are here for you.