When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least 2 points lower than your present rate? Perhaps that was sound advice several years ago, but as refinance costs have been falling recently, it could be time to take a serious look. A refinanced mortgage may be worth its cost many times over, factoring in the benefits that can come, in addition to a reduced interest rate.
When you refinance, you may be able to lower the interest rate and mortgage payment , perhaps by a lot. You also might have the option of pulling out some of the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build your home equity faster by switching to a shorter term mortgage loan.
All of these benefits do cost something, though. You'll be charged the same types of fees as with your existing home loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might investigate paying points to receive a better interest rate. If you pay (on average) three percent of the loan amount at the start, the savings for the life of the refinanced loan can be substantial. You might have heard that points can be deducted on your income taxes, but as tax regulations can be ever-changing, please speak with your tax professional before making any decisions based on this.
Speaking of taxes, once you reduce your interest rate, it follows that you'll also be reducing the interest amount that you can deduct on your taxes. This is another expense that borrowers take into consideration. Call us at (904) 342-3622 to help you do the math.
In the end, for most borrowers the total of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (904) 342-3622 to get started.
Curious about refinancing? Give us a call at (904) 342-3622.