When is Refinancing Worth it?
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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least two points under your current one? Perhaps that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a variety of advantages that will often make it worth the initial cost a few times over.
When you refinance, you may be able to lower the interest rate and monthly payment , sometimes by a lot. You might also have the option to "cash out" some of your home equity, which you are able use to consolidate debt, make home improvements, or finance a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to build your home equity quicker.
Expenses and Fees
Of course, you'll have to pay for your process of refinancing. With your refinance, you are paying for most of the same things you were charged for when you obtained your original mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You might need to pay points (prepaid interest) to gain a better interest rate. When you pay (on average) three percent of the mortgage loan amount up front, your savings for the term of the refinanced loan can be significant. You may have heard that points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to speak with your tax professional before making any decisions based on this.
Another cost that borrowers might take into account is that a lower interest rate will lower the interest amount you'll be able to deduct on your taxes. Call us at (321) 777-7277 to help you do the math.
In the end, for most borrowers the total of initial costs to refinance will be made up soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (321) 777-7277 to get you started.
Want to know more about refinancing? Call us at (321) 777-7277.