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 loan. Maybe that was good advice several years ago, but since refinance costs have been getting lower, it could be time to take a serious look. Refinancing your mortgage loan has a variety of benefits that will often make it worth the up-front expenditure a few times over.
Benefits from Refinancing
When you refinance, you could be able to lower your interest rate and monthly payment amount, sometimes significantly. You may also be able to "cash out" some of the built-up equity in your residence, that you can use to consolidate debts, add on to your home, or finance a vacation. You could have the option to refinance into a shorter-term mortgage, enabling you to build your equity faster.
Fees and Expenses
Of course, you'll have to pay for your process of refinancing. When you refinance, you're paying for basically the same things you were charged for at the time you got your current mortgage loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could offer to pay discount points (prepaid interest) to gain a lower rate of interest. The amount you'll save on the life of the mortgage may be substantial if you have paid up front about 3% of the new loan balance. We recommend that you consult with a tax professional before acting on rumors that any paid points may be deducted on your taxes.
An additional cost that borrowers may consider is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. Call us at (904) 342-3622 to help you do the math.
Most borrowers find that the monthly savings quickly outweigh the up-front expenses of refinancing. We will work with you to figure out what mortgage program is best for you, considering your cash on hand, the likelihood of selling your house in the next few years, and how refinancing will effect your taxes. Call us at (904) 342-3622 to get started.
Want to know more about refinancing your home? Call us: (904) 342-3622.