When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least two points lower than your current one? Perhaps several years ago that was sage advice, but since refinance costs have been getting lower, it may be time to take a serious look. A refinance can be worth its cost many times over, because of the advantages that come, in addition to a reduced interest rate.

Benefits from Refinancing

You might be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced mortgage. You might also have the option to "cash out" some of the built-up equity in your home, that you may use to take care of higher interest debt, add on to your home, or take a vacation. You might have the option to refinance into a shorter-term mortgage loan, giving you the ability to add to your home equity quicker.

The Cost

As you probably know, you will have some fees and expenses during your the refinance process. You will have to pay the same kinds of expenses and fees as with your existing home loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to be given a reduced interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the life of the refinanced loan can be significant. You may hear that points may be tax deductible, but because tax regulations can be difficult to keep up with, we urge you to consult with your tax professional before making any decisions based on this.

Another expense that a borrower might take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your taxes. Call us at (941) 366-5800 to help you do the math.

Most people find that the monthly savings quickly balance out the initial expenses of a refinance. We'll work with you to determine what program is perfect for you, considering your cash on hand, how likely you are to sell your home in the near future, and how refinancing may effect your taxes. Call us at (941) 366-5800 to get you started.

Curious about refinancing your home? Call us: (941) 366-5800.

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