When is Refinancing Worth it?

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It has been said that only if your new interest is at least 2 points lower, should you refinance your loan. Perhaps that was good advice several years ago, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing has various advantages that can make it worth the initial expenditure a few times over.

Benefits from Refinancing

You could be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage. You could also have the ability to "cash out" a portion of your equity, that you may use to consolidate debts, improve your home, or finance a vacation. With lower rates, you may also get the chance to build up home equity faster by switching to a shorter term mortgage loan.

Expenses and Fees

All these advantages do cost something, though. You will be charged the same types of expenses and fees as with your current mortgage loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Doing the Math

You could offer to pay discount points (prepaid interest) to gain a lower rate of interest. Your savings on the life of the loan might be significant if you've paid up front about three percent of the new loan total. Please talk to a tax professional before acting on rumors that any paid points can be deducted on your taxes.

An additional cost that borrowers might take into account is that a lower interest rate will reduce the interest amount you'll be able to deduct on your taxes. Call us at (305) 535-2230 to help you do the math.

Most borrowers find that the savings per month quickly outweigh the initial expenses of a refinance. We'll work with you to determine what mortgage program is perfect for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing will effect your taxes. Call us at (305) 535-2230 to get started.

Want to know more about refinancing your home? Call us: (305) 535-2230.

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