When is Refinancing Worth it?
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Some have said that only when your new interest is at least two points lower, should you refinance your mortgage. That could have been good advice a while back, but with refinancing dropping in cost recently, it's a good time to think about a new loan! A refinance is often worth its cost many times over, considering the benefits that it brings, as well as a reduced interest rate.
You may be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced mortgage loan. You could also have the option to "cash out" a portion of the built-up equity in your residence, which you are able use to take care of higher interest debt, improve your home, or take a vacation. With lower rates, you might also be able to build your home equity faster by changing to a shorter term mortgage.
Fees and Expenses
All these benefits do come with some expense, though. When you refinance, you're paying for many of the same things you were charged for at the time you obtained your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could need to pay discount points (prepaid interest) to get a better interest rate. If you pay (on average) three percent of the loan amount initially, your savings for the life of the refinanced mortgage can be great. Please talk to a tax professional before acting on advice that any points paid may be deducted on your federal income taxes.
Another expense that borrowers may take into account is that a lower rate of interest will lower the interest amount you'll deduct on your taxes. Call us at (321) 777-7277 to help you do the math.
In the end, for most the amount of up-front costs to refinance are made up very quickly in monthly savings. We'll work with you to find out which program is the right fit for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing may have on your taxes. Call us at (321) 777-7277 to get you started.
Want to know more about refinancing your home? Call us: (321) 777-7277.