When is Refinancing Worth it?

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Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least two points under your current one? That may have been valid a while back, but with refinancing dropping in cost recently, it is a good time to think about a new mortgage loan! Refinancing has various benefits that can make it worth the initial cost several times over.

Benefits from Refinancing

When you refinance, you might have the ability to reduce your interest rate and mortgage payment amount, sometimes significantly. You also could be given the option of pulling out some of your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage, giving you the ability to build up your home equity quicker.

The Cost

As you probably know, you'll have to pay for the the refinance process. With your refinance, you are paying for a lot of the same things you paid for during your current mortgage. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

Paying points can help you get a lower interest rate. When you pay (on average) 3% of the loan amount at the start, the savings for the life of the refinanced mortgage loan can be great. You may have heard that points may be deducted on your income taxes, but since tax regulations can be ever-changing, we urge you to consult your tax professional before considering this in your calculations.

An additional cost that a borrower might consider is that a reduced interest rate will reduce the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at (904) 342-3622.

Ultimately, for most borrowers the amount of initial costs to refinance will be paid back soon in savings each month. We can help you find out your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (904) 342-3622 to get you started.

Curious about refinancing your home? Call us: (904) 342-3622.

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