When is Refinancing Worth it?
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Some have said that only when your new interest is at least two points below your current rate, should you refinance your mortgage. Maybe several years ago that was wise advice, but since refinance costs have been getting lower, it could be a good time to look into it. Refinancing has some advantages that often make it worth the up-front expenditure a few times over.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage loan. Additionally, you might have the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also get the chance to build up home equity faster by changing to a shorter-term mortgage.
As you probably expect, you'll have some fees and expenses during your the refinance process. You'll have to pay the same kinds of expenses and fees as with your present home loan. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Do the Math
Paying points can help you get a better interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the life of the new mortgage loan can be substantial. You might be told that points can be deducted on your income taxes, but as tax regulations can be ever-changing, we urge you to consult with your tax professional before depending on this.
Another expense that a borrower might consider is that a lower interest rate will lower the interest amount you will be able to deduct on your taxes. Call us at 954-486-6000 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance are made up very quickly in savings each month. We will work with you to figure out which loan program is the right fit for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing might effect your taxes. Call us at 954-486-6000 to get you started.