Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate is at least two points below your present rate? That might have been valid a while back, but with refinancing dropping in cost recently, it's never the wrong time to explore the options of a new mortgage! Refinancing has a number of advantages that will often make it worth the initial expenditure a few times over.

Benefits from Refinancing

You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage. You also may have the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build up home equity more quickly by moving to a shorter term mortgage loan.

Expenses and Fees

All these advantages do come with some expense, though. You will be charged the same types of fees as you did with your current mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can get you a better interest rate. When you pay (on average) 3% of the loan amount at the start, your savings for the life of the refinanced loan can be significant. We recommend that you talk to a tax professional before acting on rumors that any points paid can be deducted on your federal income taxes.

Another thing about taxes is that once your interest rate is reduced, it follows that you'll also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is another expense that some borrowers consider. We can help you do the math! Call us at (941) 366-5800.

Ultimately, for most the amount of up-front costs to refinance are paid back soon in monthly savings. We will work with you to figure out what program is ideal for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing will probably have on your taxes. Call us at (941) 366-5800 to get started.

Curious about refinancing? Give us a call: (941) 366-5800.

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