When is Refinancing Worth it?

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Ever heard the pearl of wisdom that says you should only refinance if the new interest rate will be at least 2 points lower than your current rate? That could have been accurate years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to think about a new mortgage loan! A refinanced loan is often worth its cost many times over, considering the advantages that can come, along with a reduced interest rate.

Benefits

You may be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with your refinanced mortgage. You may also be able to "cash out" a portion of the built-up equity in your residence, which you will be able use to take care of higher interest debt, make home improvements, or finance a vacation. You may be able to refinance to a shorter-term mortgage program, enabling you to build up your home equity quicker.

Fees and Expenses

All these benefits do come with some expense, though. With your refinance, you're paying for a lot of the same things you paid for at the time you got your existing mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might think about paying points to reduce your interest rate. If you pay (on average) three percent of the loan amount at the start, your savings for the life of the new loan can be great. You may hear that these points may be deducted on your income taxes, but as tax regulations can be difficult to keep up with, please consult a tax professional before considering this in your calculations.

An additional expense that borrowers might consider is that a reduced rate of interest will lower the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at (321) 777-7277.

Most borrowers find that the savings per month outweigh the initial expenses of a refinance. We can help you explore your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (321) 777-7277 to get you started.

Curious about refinancing your home? Call us at (321) 777-7277.

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