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 is at least two points under your current rate? Maybe that was good advice several years ago, but since refinance costs have been getting lower, it may be a good time to look into it. A refinanced mortgage loan is often worth its cost many times over, factoring in the advantages that may come, along with a lower interest rate.

Advantages

When you refinance, you might have the ability to reduce your interest rate and monthly payment , perhaps considerably. You might also have the ability to "cash out" a portion of the built-up equity in your residence, that you may use to consolidate debts, make home improvements, or plan a vacation. You may be able to refinance into a shorter-term mortgage, enabling you to build your home equity faster.

Fees and Expenses

As you probably know, you will have some fees and expenses during your the refinance process. When you refinance, you are paying for basically the same things you were charged for during your current mortgage. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You could need to pay discount points (prepaid interest) to gain a more favorable rate of interest. Your savings over the life of the loan may be significant if you have paid up front about 3% of the new loan balance. You may be told that the points can be tax deductible, but because tax regulations can be ever-changing, we urge you to speak with a tax professional before depending on this.

One more expense that a borrower may consider is that a lower rate of interest will reduce the interest amount you will be able to deduct on your taxes. We can help you do the math! Call us at (321) 777-7277.

Ultimately, for most borrowers the amount of up-front costs to refinance are made up soon in savings each month. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at (321) 777-7277 to get you started.

Want to know more about refinancing your home? Give us a call: (321) 777-7277.

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