When is Refinancing Worth it?
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It has been said that only in the case your new interest will be at least two points lower, should you refinance your loan. That may have been true years ago, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage! Refinancing your mortgage loan has a variety of advantages that often make it worth the up-front expenditure several times over.
You could be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced mortgage. You also might be given the option of tapping into the equity in your home by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also get the chance to build up home equity more quickly by changing to a shorter-term loan.
Expenses and Fees
All of these benefits do come with some expense, though. When you refinance, you're paying for many of the same things you were charged for when you obtained your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can result in a better interest rate. Your savings over the life of the mortgage loan may be significant if you've paid up front about three percent of the new loan total. You may have heard that points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, we urge you to speak with your tax professional before making decisions based on this.
One more cost that borrowers may consider is that a reduced interest rate will lower the interest amount you'll be able to deduct on your federal income taxes. Call us at 305-967-7200 to help you do the math.
Most people find that the monthly savings outweigh the up-front expenses of refinancing. We will help you determine which loan program is perfect for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing can effect your taxes. Call us at 305-967-7200 to get started.
Curious about refinancing? Call us: 305-967-7200.