When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least 2 points below your present one? Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it may be time to take a serious look. A refinanced mortgage loan is often worth its cost several times over, because of the advantages that it brings, in addition to a lower interest rate.

Advantages

You could be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced mortgage. You may also be able to "cash out" some of the built-up equity in your residence, which you may use to take care of higher interest debt, add on to your home, or take a vacation. You might have the option to refinance to a shorter-term mortgage loan, enabling you to build your home equity faster.

Expenses and Fees

As you probably know, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for most of the same things you paid for when you got your current mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You could offer to pay discount points (prepaid interest) to get a lower rate of interest. If you pay (on average) 3% of the loan amount at the start, your savings for the term of the refinanced loan can be great. We recommend that you talk to a tax professional before acting on rumors that the points paid can be deducted on your federal income taxes.

Another thing about taxes is that if you bring down your interest rate, of course you will also be reducing the interest amount that you'll be able to deduct from your taxes. This is one more cost that some borrowers take into account. We can help you do the math! Call us at 305-967-7200.

Most people find that the savings each month balance out the up-front expenses of a refinance. We can help you find out your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 305-967-7200 to get you started.

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

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