When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points below your existing rate? Maybe several years ago that was good advice, but as refinance costs have been falling recently, it may be time to take a serious look. A refinance can be worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate.

Advantages

You might be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced loan. You might also have the ability to "cash out" a portion of the built-up equity in your residence, which you may use to consolidate debts, improve your home, or plan a vacation. You may be able to refinance into a shorter-term mortgage program, enabling you to add to your equity quicker.

Fees and Expenses

As you probably know, you'll have some fees and expenses during your process of refinancing. You'll pay the same types of expenses and fees as with your existing home loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could need to pay points (prepaid interest) to gain a better interest rate. If you pay (on average) 3% of the loan amount up front, your savings for the term of the refinanced loan can be significant. Please consult a tax professional before acting on hear-say that the points paid may be deducted on your taxes.

Another thing about taxes is that if you lower your interest rate, it follows that you'll also be lowering the paid interest amount that you will be able to deduct from your federal income taxes. This is one more expense that some borrowers take into account. We can help you do the math! Call us at 954.920.9799.

All things considered, for most borrowers the total of up-front costs to refinance will be made up soon in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 954.920.9799 to get started.

Curious about refinancing your home? Give us a call at 954.920.9799.

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