When is Refinancing Worth it?
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Looking for mortgage advice? We'll be glad to talk about your mortgage needs! Call us at (941) 366-5800. Want to get started? Apply Now.
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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least two points lower than your existing rate? Perhaps several years ago that was sage advice, but since refinance costs have been falling recently, it could be a good time to take a serious look. A refinance may be worth its cost several times over, because of the benefits that it brings, in addition to a reduced interest rate.
Benefits
You could be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced mortgage loan. You could also have the ability to "cash out" a portion of your home equity, that you are able use to consolidate debt, make home improvements, or plan a vacation. You might be able to refinance to a shorter-term mortgage, enabling you to build up your equity faster.
The Cost
Of course, you'll have to pay for the process of refinancing. With your refinance, you are paying for basically the same things you paid for during your existing mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying discount points can get you a lower interest rate. When you pay (on average) three percent of the mortgage loan amount at the start, the savings for the life of the new loan can be substantial. Please consult with a tax professional before acting on advice that the points paid may be deducted on your federal income taxes.
Another cost that borrowers might take into account is that a lower interest rate will lower the interest amount you will deduct from your taxes. Call us at (941) 366-5800 to help you do the math.
In the end, for most people the amount of up-front costs to refinance are paid back soon in monthly savings. We'll work with you to find out what mortgage loan program is ideal for you, taking into account your cash on hand, the likelihood of selling your home in the next few years, and the effect refinancing may have on your taxes. Call us at (941) 366-5800 to get started.
Curious about refinancing your home? Call us: (941) 366-5800.