When is Refinancing Worth it?
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It has been said that only when your new interest is at least 2 points below your current rate, should you refinance your mortgage. Maybe several years ago that was good advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinanced mortgage loan is often worth its cost many times over, factoring in the advantages that can come, along with a lower interest rate.
When you refinance, you could be able to reduce the interest rate and monthly mortgage payment amount, sometimes significantly. You may also have the ability to "cash out" a portion of your equity, which you are able use to consolidate debts, improve your home, or finance a vacation. You could have the option to refinance into a shorter-term mortgage, giving you the ability to build up your home equity quicker.
All these advantages do cost something, though. You will pay the same sort of expenses and fees as you did with your existing mortgage loan. Included in your costs 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 lower interest rate. The money you will save on the life of the mortgage might be substantial if you've paid up front about three percent of the new loan total. You may be told that the points can be tax deductible, but because tax regulations are difficult to keep up with, please speak with a tax professional before making decisions based on this.
One more cost that a borrower might consider is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. Call us at (321) 777-7277 to help you do the math.
Most borrowers find that the monthly savings balance out the up-front cost of refinancing. We will help you determine which mortgage program is the best fit for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing may effect your taxes. Call us at (321) 777-7277 to get you started.
Curious about refinancing? Call us at (321) 777-7277.