When is Refinancing Worth it?

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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points below your current rate? Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it may be time to look into it. A refinanced mortgage may be worth its cost many times over, factoring in the benefits that it brings, as well as a lower interest rate.

Advantages

When you refinance, you may be able to reduce your interest rate and monthly payment , perhaps considerably. You also could have the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You may 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'll have to pay for the the refinance process. You'll have the same types of fees as you did with your existing mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might think about paying points to reduce your interest rate. The amount you'll save on the life of the mortgage loan might be substantial if you've paid up front about 3% of the new loan total. You might hear that points may be tax deductible, but since tax regulations are difficult to keep up with, please consult with your tax professional before considering this in your calculations.

Another thing about taxes is that once your interest rate is reduced, of course you'll also be reducing the interest amount that you may deduct from your federal income taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at (941) 366-5800.

Ultimately, for most the amount of initial costs to refinance are paid back very quickly in savings each month. We will work with you to determine which loan program is the best fit for you, considering your cash on hand, how likely you are to sell your residence in the near future, and how refinancing can effect your taxes. Call us at (941) 366-5800 to get started.

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

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