When is Refinancing Worth it?

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It has been said that only when your new interest is at least 2 points below your current rate, should you refinance your loan. That might have been valid a while back, but since refinancing has been costing less recently, it's a good time to think about a new mortgage! Refinancing your mortgage has some benefits that often make it worth the initial cost many times over.

Advantages of Refinancing

When you refinance, you may be able to reduce the interest rate and monthly payment amount, sometimes significantly. You also could have the option of tapping into the equity in your home by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You might have the option to refinance to a shorter-term mortgage program, enabling you to build your home equity faster.

The Cost

Of course, you will have some fees and expenses during the process of refinancing. When you refinance, you're paying for most of the same things you were charged for at the time you got your existing mortgage loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You could need to pay points (prepaid interest) to gain a more favorable rate of interest. Your savings on the life of the loan could be substantial if you have paid up front about 3% of the new loan total. You may have heard that points may be tax deductible, but because tax regulations are difficult to keep up with, please consult with your tax professional before depending on this.

Speaking of taxes, if you reduce your interest rate, of course you'll also be lowering the paid interest amount that you'll be able to deduct from your federal income taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at (305) 535-2230.

All things considered, for most people the total of initial costs to refinance are paid back soon in savings each month. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at (305) 535-2230 to get started.

Want to know more about refinancing? Give us a call at (305) 535-2230.

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