When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points lower than your current rate? Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it could be time to take a serious look. A refinanced mortgage loan may be worth its cost several times over, factoring in the advantages that it brings, as well as a reduced interest rate.

Benefits from Refinancing

When you refinance, you could be able to reduce your interest rate and monthly mortgage payment , perhaps considerably. You could also have the option to "cash out" a portion of the built-up equity in your home, that you may use to consolidate debt, make home improvements, or take a vacation. You may be able to refinance to a shorter-term mortgage program, enabling you to build up your equity quicker.

Expenses and Fees

Of course, you'll have to pay for the the refinance process. With your refinance, you are paying for many of the same things you were charged for during your existing mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

Paying points can result in a lower interest rate. The money you'll save over the life of the mortgage loan could be significant if you have paid up front about 3% of the new loan total. You might be told that points may be tax deductible, but because tax regulations can be ever-changing, please speak with your tax professional before depending on this.

One more expense that borrowers might consider is that a lower interest rate will reduce the interest amount you will be able to deduct from your federal income taxes. We can help you do the math! Call us at (941) 366-5800.

Most borrowers find that the monthly savings outweigh the up-front cost of a refinance. We can help you explore your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (941) 366-5800 to get you started.

Want to know more about refinancing your home? Call us: (941) 366-5800.

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