When is Refinancing Worth it?

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It has been said that only when your new interest will be at least two points lower, should you refinance your mortgage. Maybe that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing has various advantages that can make it worth the initial cost a few times over.

Benefits

You could be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with your refinanced loan. You also may be given the option of pulling out some of the equity in your property by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter-term loan.

Expenses and Fees

As you probably know, you'll have some fees and expenses during your the refinance process. You will have to pay the same kinds of expenses and fees as with your current mortgage loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

You might need to pay discount points (prepaid interest) to gain a lower interest rate. When you pay (on average) three percent of the loan amount at the start, the savings for the term of the refinanced mortgage can be substantial. You might hear that the points may be deducted on your income taxes, but as tax regulations can be ever-changing, please consult a tax professional before considering this in your calculations.

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

Most borrowers find that the monthly savings balance out the up-front cost of a refinance. We'll work with you to determine what mortgage loan program is ideal for you, taking into account your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing will probably have on your taxes. Call us at (904) 342-3622 to get you started.

Want to know more about refinancing your home? Call us: (904) 342-3622.

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2800 North Fifth Street Suite 301B
St. Augustine, FL 32084