When to Refinance

It has been said that only if your new interest will be at least two points lower, should you refinance your mortgage. Maybe that was sound advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing your mortgage loan has various advantages that can make it worth the initial expenditure many times over.

Advantages of Refinancing

When you refinance, you may be able to lower the interest rate and monthly payment amount, sometimes significantly. You might also have the ability to “cash out” some of your home equity, which you will be able use to consolidate debt, make home improvements, or take a vacation. With lower interest rates, you may also be able to build your home equity faster by moving to a shorter term mortgage loan.

Expenses and Fees

All of these advantages do come with some expense, though. You will pay the same kinds of fees as you did with your existing mortgage loan. Among these will be settlement costs, appraisal fees, lender’s title insurance, underwriting expenses, and others.

Doing the Math

Paying discount points can get you a lower interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the life of the refinanced mortgage can be significant. You might be told that points may be tax deductible, but because tax regulations can be ever-changing, we urge you to consult with a tax professional before considering this in your calculations.

Another cost that borrowers might take into account is that a reduced rate of interest will reduce the interest amount you’ll deduct on your taxes. We can help you do the math! Call us at (513) 474-0899.

Ultimately, for most borrowers the total of up-front costs to refinance are made up very quickly in monthly savings. We’ll work with you to find out what program is ideal for you, looking at your cash on hand, how likely you are to sell your residence in the near future, and the effect refinancing may have on your taxes. Call us at (513) 474-0899 to get started.