Refinance Tips

Refinancing your home is a big decision. It can be extremely beneficial to you, cutting your interest rates in half, improve your credit score and have more available cash each month. But is refinancing the best option for you? Below are several factors you should consider before refinancing your home.

Evaluate Your Assets
Saving money is important to many consumers in today's economy, and refinancing your home loan is one way you can significantly lower your monthly mortgage payments. You need an expert’s careful analysis as well as experienced advice from your mortgage broker to ensure that you make the right decision.

Deciding to Refinance
The decision on whether or not to refinance your home traditionally means balancing the amount you would save with the new, lower interest rate against the costs of refinancing. More recently though, mortgage lenders have begun to introduced "no cost" and low-cost refinancing packages that minimize or completely eliminate the out-of-pocket expenses of refinancing for you, which is why it has become such a popular option.

Cash Out Refinance
Some lenders offer a refinancing package that allow you to refinance for more than the balance remaining on your old home loan. This is commonly referred to as "cashing out" in the mortgage industry. The economy has also caused interest rates to drop recently which may allow you to refinance your home without increasing your monthly payments.

The extra cash that results from this type of refinancing can be used in a multitude of ways. One option is to use these funds to pay off any loans with higher interest rates that you may already have. If you don’t have any other outstanding debts, you may be interested in using the money in a way that increases the equity of your home, such as building an addition or other types of renovation. Your mortgage broker can help you decide the best way to use the extra funds you’ll have available after refinancing.

Does Paying Points Negatively Affect My Rate?
A “point” in mortgage terms, is equal to one percent of the loan amount. When making the decision to refinance your home loan there is typically a varied range of interest rates with different amounts of “points” options available to you. To determine the best home loan option for you, you’ll need an experienced professional to analyze the different interest rates and related points. This will end up saving you a lot of money in the long run. It’s generally a good idea to discuss all the options with your home loan advisor before making any big decisions.

Refinance Expenses
Much like acquiring an initial home loan, refinancing traditionally shares similar fees and expenses. These can include legal fees, application fees, settlement costs and other related expenses.

Additional refinancing expenses can include a fee charged if you paid off your original mortgage early or the points associated with the refinance and the home loan interest rate. For the most part the costs don’t end up being higher than three and six percent of the total amount of the loan. Give us a call at 773-305-5626 and speak with one of our knowledgeable representatives for more details on what refinancing expenses you may encounter and how best to avoid them.

Your Second Refinancing Attempt
Refinancing is almost always worth it for home owners if you it means reducing your monthly payments. The money saved from refinancing can be used in many ways, including: building emergency cash funds, building additions onto their homes or saving it for your child's college fund. There is even a tax write off associated with a second refinance, which can significantly benefit your budget. Fill out our contact form to find out more details about 2nd refinancing benefits.

Converting Your Adjustable Rate Mortgages to a Fixed Rate Mortgage
There are two rate options available to homeowners for refinancing their home loans. These include:

• fixed rate mortgages
• adjustable rate mortgages, often referred to as ARMs.

Fixed rates have a fixed interest rate for each month, while ARMs generally hold more attractive low introductory rates. But, due to financial market instability these low rates offered in ARMs can jump quickly and recent refinancers may find themselves paying a lot more than they first agreed to pay.

However, not all adjustable rate mortgages are unpredictable; homeowners who know for sure the length of time they plan to stay in their home have the option of securing an ARM for a very specific amount of time, completely avoiding the rising payments more ARM borrowers are subject to.

Refinancing and Tax Benefits
While the tax issues related to home loans and refinancing can often be confusing, a skilled A and N Mortgage representative can easily guide you through the process.

To explain briefly, the Internal Revenue Service (IRS) has ruled that interest paid for refinancing must be deducted over the life of the loan. However, if the home loan is being used to make improvements to your house, the borrowers may be permitted to deduct a portion of the interest right away.

Please fill out our online form or give us a call at 773-305-5626 for a free, no obligation consultation. We can answer any questions you have about mortgages, refinancing or the benefits of buying a new home at any time.

For a free, no obligation consultation do not hesitate to contact us or ask a question.

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