When is Refinancing Worth it?

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Ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points under your present one? Perhaps that was sound advice a number of years ago, but since refinance costs have been falling recently, it could be a good time to take a serious look. A refinanced loan may be worth its cost many times over, factoring in the advantages that come, in addition to a reduced interest rate.

Advantages

You may be able to lower your interest rate (sometimes substantially) and make smaller monthly payments with your refinanced loan. You also could be given the option of pulling out some of your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You could be able to refinance to a shorter-term mortgage loan, giving you the ability to build up your home equity faster.

Expenses and Fees

As you probably expect, you will have some fees and expenses during your process of refinancing. You will be charged the same kinds of fees as with your present mortgage. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might investigate paying points to reduce your interest rate. The amount you'll save over the life of the mortgage may be significant if you have paid up front about 3% of the new loan balance. You may be told that the points may be tax deductible, but since tax regulations can be ever-changing, we urge you to speak with your tax professional before depending on this.

One more expense that borrowers may take into account is that a reduced interest rate will reduce the interest amount you'll be able to deduct from your taxes. Call us at (321) 777-7277 to help you do the math.

Ultimately, for most borrowers the total of up-front costs to refinance are made up soon in monthly savings. We'll work with you to find out what program is best for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and how refinancing may effect your taxes. Call us at (321) 777-7277 to get you started.

Curious about refinancing your home? Give us a call at (321) 777-7277.

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