When to Refinance

Have you ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least 1 point lower than your present rate? That may have been accurate a while back, but as refinancing has been costing less over the last few years, it is never the wrong time to consider a new mortgage! A refinanced mortgage is often worth its cost many times over, factoring in the benefits that come, in addition to a lower interest rate.

Benefits

You might be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage. Additionally, you might be given the option of tapping into your home equity by “cashing out” a sum of money to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also get the chance to build up home equity faster by changing to a shorter term mortgage.

The Cost

As you probably expect, you will have some fees and expenses during your the refinance process. With your refinance, you’re paying for basically the same things you were charged for at the time you got your current mortgage. These might include settlement costs, appraisal fees, lender’s title insurance, underwriting fees, and others.

Doing the Math

You might think about paying points to reduce your interest rate. The money you’ll save over the life of the loan may be substantial if you have paid up front about 3% of the new loan balance. We recommend that you consult with a tax professional before acting on hear-say that these points paid may be deducted on your federal income taxes.

One more expense that a borrower may consider is that a lower interest rate will reduce the interest amount you will be able to deduct on your taxes. We can help you do the math! Call us at 503.422.6013.

Most people find that the savings per month outweigh the initial cost of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 503.422.6013 to get started.