When is Refinancing Worth it?

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It has been said that only when your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That might have been sound advice years ago, but with refinancing dropping in cost over the last few years, it is a good time to consider a new mortgage! A refinanced mortgage loan may be worth its cost several times over, because of the benefits that it brings, as well as a lower interest rate.

Advantages of Refinancing

You could be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage loan. You also might have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build up home equity faster by moving to a shorter-term mortgage.

Fees and Expenses

All of these benefits do cost something, though. You will have the same kinds of expenses and fees as you did with your present mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might think about paying points to receive a better interest rate. If you pay (on average) 3% of the loan amount initially, your savings for the life of the refinanced loan can be great. Please consult a tax professional before acting on advice that any points paid can be deducted on your federal income taxes.

Another cost that a borrower 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 305-967-7200 to help you do the math.

Most people find that the monthly savings quickly outweigh the initial cost of refinancing. We will work with you to determine which mortgage loan program is the ideal fit for you, considering your cash on hand, the likelihood of selling your house in the near future, and how refinancing may effect your taxes. Call us at 305-967-7200 to get started.

Want to know more about refinancing your home? Give us a call: 305-967-7200.

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