Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least two points under your current rate? Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it may be time to look into it. Refinancing your mortgage has various advantages that can make it worth the up-front expenditure many times over.


You could be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced loan. You might also have the ability to "cash out" some of your home equity, that you may use to take care of higher interest debt, make home improvements, or take a vacation. With lower interest rates, you might also be able to build up home equity more quickly by moving to a shorter term mortgage.

The Cost

As you probably expect, you will have some fees and expenses during your the refinance process. When you refinance, you're paying for most of the same things you were charged for when you got your original mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might consider paying points to get a reduced interest rate. Your savings over the life of the mortgage may be substantial if you've paid up front about three percent of the new loan balance. We recommend that you consult a tax professional before acting on hear-say that the points paid may be deducted on your taxes.

Speaking of taxes, if your interest rate is reduced, it follows that you'll also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is another cost that some borrowers take into account. Call us at 561-395-4264 to help you do the math.

Most people find that the monthly savings outweigh the up-front cost of a refinance. We'll work with you to determine which loan program is right for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and the effect refinancing could have on your taxes. Call us at 561-395-4264 to get started.

Want to know more about refinancing? Give us a call at 561-395-4264.

Alternative Mortgage Group

80 SW 14 Ave
Boca Raton, FL 33486