When is Refinancing Worth it?
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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least two points under your present rate? That could have been true years ago, but with refinancing dropping in cost in recent years, it's a good time to think about a new mortgage! Refinancing your loan has a variety of benefits that will often make it worth the up-front cost several times over.
You may be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with a refinanced loan. You could also have the ability to "cash out" a portion of your equity, that you may use to take care of higher interest debts, add on to your home, or take a vacation. You could have the option to refinance into a shorter-term mortgage, enabling you to add to your equity quicker.
Of course, you will have to pay for your the refinance process. With your refinance, you're paying for most of the same things you were charged for during your original mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might offer to pay discount points (prepaid interest) to gain a better rate of interest. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the refinanced mortgage can be great. You may be told that these points can be tax deductible, but because tax regulations can be ever-changing, please consult a tax professional before making decisions based on this.
One more cost that borrowers may take into account is that a reduced rate of interest will reduce the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at 727-392-4227.
Most borrowers find that the monthly savings quickly balance out the initial expenses of refinancing. We will work with you to find out which mortgage program is best for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing could effect your taxes. Call us at 727-392-4227 to get started.
Curious about refinancing your home? Give us a call: 727-392-4227.