When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only refinance if your new interest rate will be at least two points under your present one? That might have been valid a while back, but as refinancing has been costing less in recent years, it's a good time to think about a new mortgage! Refinancing your loan has some advantages that can make it worth the up-front expenditure many times over.
You could be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with a refinanced mortgage. You might also be able to "cash out" a portion of your home equity, which you will be able use to take care of higher interest debts, make home improvements, or take a vacation. You may be able to refinance to a shorter-term mortgage program, giving you the ability to add to your home equity quicker.
Fees and Expenses
All of these benefits do come with some expense, though. With your refinance, you are paying for most of the same things you paid for at the time you obtained your existing mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can result in a lower interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the term of the new mortgage can be great. You may have heard that these points can be tax deductible, but as tax regulations are ever-changing, we urge you to consult with a tax professional before making any decisions based on this.
Speaking of taxes, if your interest rate is reduced, of course you'll also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is another cost that borrowers consider. Call us at (321) 777-7277 to help you do the math.
Most people find that the savings each month quickly balance out the initial expenses of a refinance. We can help you figure out your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (321) 777-7277 to get you started.
Curious about refinancing your home? Call us: (321) 777-7277.