1. Equity Direct Funding
What does it cost to refinance? What are the benefits?
Ever heard the old rule of thumb, you should only refinance if your new interest rate is at least
two points lower? That may have been true years ago, but with refinancing dropping in cost over
the last few years, it's never the wrong time to think about a new loan! Refinancing has a number
of benefits that often make it worth the up-front expenditure many times over.
When you refinance, you might be able to lower your interest rate and monthly payment --
sometimes significantly. You might also be able to "cash out" some of the built-up equity in your
home, which you can use to consolidate debt, improve your home, take a vacation -- whatever!
With lower rates and balances, you might also be able to build up home equity faster with a
shorter-term new mortgage.
All these benefits do cost something, though. When you refinance, you're paying for most of the
same things you paid for when you obtained your original mortgage. These might include
settlement costs and other fees, an appraisal, lender's title insurance, underwriting fees, and so
on.
You might have to pay a penalty if you refinance your previous mortgage too quickly. That
depends on the terms of your existing mortgage. These penalties are illegal in some places, and
more often than not when they're there apply only for the first year or two. We'll help you figure
it out.
You might pay points to get a more favorable interest rate. If you pay (on average) three percent
of the loan amount up front, your savings for the life of the new mortgage can be significant.
You should be aware that the IRS has recently said that points paid for the purpose of
refinancing your mortgage cannot be deducted in their entirety in the year you pay them, unless
the refinanced loan is primarily for home improvements. Consult your tax professional before
deducting points you pay on your new mortgage from your federal income taxes.
Speaking of taxes, if you lower your interest rate, naturally you will be lowering the amount of
mortgage interest payments you can deduct from your federal income taxes. This is another cost
that some borrowers consider. We can help you do the math! –Equity Direct Funding

2. Ultimately, for most people the amount of up-front costs to refinance are made up very quickly
in monthly savings. We'll work with you to determine what program is best for you, considering
your cash on hand, how likely you are to sell your home in the near future, and what effect
refinancing might have on your taxes.
How do you "buy" a better rate?
Do you plan on keeping your loan for a while? Then it may make sense to "buy" a lower interest
rate by paying one or more "points."
Even if you're unsure of how long you plan to keep your mortgage before you move or refinance,
paying points now for a lower rate may make sense. For example, do you have a high-paying job
now but you think you might change careers in the next few years? We can help you sort it out.
It's part of our finding the right loan for your means and goals.
A point -- which equals one percent (1%) of the total loan amount -- is an up-front fee that
lowers your monthly interest rate and total interest due over the life of the loan. So, a one point
loan will have a lower interest rate than a no point loan. Basically, when you pay points you
trade off paying money later in favor of paying money now. You can pay fractions of points,
meaning there are a lot of points packages that can make a loan's terms more favorable if that's
what's right for you.
There are a variety of rate and point combinations available. When you look at different loan
programs, don't look just at the rate -- compare the whole package. Federal law requires lenders
to publish their loans' Annual Percentage Rate, or A.P.R. The A.P.R. is a tool used to compare
different terms, offered rates, and points.
Equity Direct Funding
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