When is Refinancing Worth it?

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least 2 points under your existing one? That may have been accurate years ago, but as refinancing has been costing less in recent years, it is never the wrong time to explore the options of a new mortgage! A refinance can be worth its cost many times over, considering the advantages that it brings, in addition to a reduced interest rate.

Advantages

You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You could also have the option to "cash out" a portion of your home equity, which you will be able use to take care of higher interest debt, make home improvements, or take a vacation. With reduced rates, you might also get the chance to build up home equity more quickly by moving to a shorter term mortgage.

The Cost

All of these advantages do cost something, though. You'll have to pay the same sort of expenses and fees as with your present mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying discount points can result in a lower interest rate. When you pay (on average) 3% of the loan amount initially, the savings for the term of the refinanced mortgage loan can be significant. Please consult with a tax professional before acting on advice that any points paid can be deducted on your taxes.

One more cost that a borrower might take into account is that a lower rate of interest will reduce the interest amount you will be able to deduct on your taxes. Call us at (321) 777-7277 to help you do the math.

Ultimately, for most the total of initial costs to refinance are made up soon in savings each month. We will work with you to determine what mortgage program is best for you, considering your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing will have on your taxes. Call us at (321) 777-7277 to get started.

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

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