When is Refinancing Worth it?

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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points under your current rate? That could have been valid a while back, but as refinancing has been costing less recently, it is never the wrong time to explore the options of a new loan! Refinancing your mortgage loan has a number of benefits that will often make it worth the up-front expenditure a few times over.

Benefits

You may be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with a refinanced loan. Additionally, you might have the option of tapping into the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You might be able to refinance to a shorter-term mortgage loan, enabling you to build your home equity quicker.

The Cost

Of course, you'll have some fees and expenses during your process of refinancing. When you refinance, you are paying for basically the same things you were charged for when you got your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying points can result in a lower interest rate. Your savings on the life of the mortgage loan could be substantial if you have paid up front about 3% of the new loan balance. You might have heard that these points may be tax deductible, but because tax regulations can be ever-changing, we urge you to speak with a tax professional before making any decisions based on this.

Another cost that a borrower might consider is that a lower rate of interest will reduce the interest amount you'll be able to deduct from your federal income taxes. Call us at 407-583-6250 to help you do the math.

Most borrowers find that the savings each month quickly outweigh the initial cost of a refinance. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at 407-583-6250 to get you started.

Curious about refinancing your home? Give us a call: 407-583-6250.

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