When is Refinancing Worth it?
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It has been said that only if your new interest will be at least 2 points lower, should you refinance your mortgage. That could have been valid a while back, but with refinancing dropping in cost recently, it is never the wrong time to consider a new mortgage! A refinanced loan may be worth its cost many times over, factoring in the benefits that come, in addition to a lower interest rate.
When you refinance, you might be able to reduce the interest rate and monthly mortgage payment amount, sometimes considerably. You could also have the ability to "cash out" a portion of the built-up equity in your home, which you will be able use to consolidate debt, add on to your home, or plan a vacation. With reduced interest rates, you might also get the chance to build your home equity faster by switching to a shorter term mortgage loan.
Expenses and Fees
All these benefits do come with some expense, though. With your refinance, you're paying for basically the same things you were charged for at the time you got your current mortgage loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Do the Math
You might offer to pay points (prepaid interest) to gain a lower interest rate. If you pay (on average) 3% of the loan amount up front, the savings for the term of the refinanced mortgage can be substantial. Please consult with a tax professional before acting on hear-say that any points paid can be deducted on your federal income taxes.
Another thing about taxes is that when your interest rate is reduced, naturally you will also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is another cost that some borrowers consider. Call us at (904) 342-3622 to help you do the math.
Most people find that the monthly savings quickly balance out the up-front expenses of refinancing. 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 near future, and your available cash. Call us at (904) 342-3622 to get you started.
Want to know more about refinancing your home? Call us: (904) 342-3622.