When is Refinancing Worth it?
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Have you ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least two points under your existing rate? Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it may be a good time to take a serious look. A refinanced mortgage loan is often worth its cost several times over, considering the advantages that it brings, along with a lower interest rate.
You might be able to bring down your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced loan. You may also be able to "cash out" some of your equity, which you can use to consolidate debt, improve your home, or plan a vacation. With reduced rates, you might also be able to build your home equity faster by changing to a shorter-term mortgage.
Fees and Expenses
As you probably know, you'll have to pay for your the refinance process. You will pay the same types of fees as you did with your existing mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can result in a better interest rate. If you pay (on average) 3% of the loan amount initially, your savings for the term of the refinanced mortgage loan can be great. You may hear that the points may be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to speak with your tax professional before depending on this.
One more expense that a borrower might take into account is that a reduced rate of interest will reduce the interest amount you'll be able to deduct on your federal income taxes. Call us at 954.920.9799 to help you do the math.
In the end, for most the total of initial costs to refinance will be made up very quickly in savings each month. We will help you find out what loan program is perfect for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and what effect refinancing will probably have on your taxes. Call us at 954.920.9799 to get you started.
Want to know more about refinancing? Give us a call at 954.920.9799.