When is Refinancing Worth it?
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It has been said that only when your new interest will be at least 2 points lower, should you refinance your mortgage. That may have been accurate a while back, but as refinancing has been costing less recently, it's never the wrong time to consider a new mortgage loan! Refinancing has a variety of benefits that can make it worth the up-front expenditure many times over.
Benefits from Refinancing
You could be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You might also be able to "cash out" some of your home equity, which you will be able use to take care of higher interest debts, make home improvements, or plan a vacation. With lower interest rates, you might also get the chance to build up home equity faster by moving to a shorter term loan.
Fees and Expenses
All of these benefits do come with some expense, though. With your refinance, you are paying for a lot of the same things you were charged for when you got your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Do the Math
Paying discount points can help you attain a lower interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the refinanced mortgage can be great. We recommend that you consult with a tax professional before acting on rumors that any points paid may be deducted on your taxes.
An additional expense that a borrower might consider is that a reduced rate of interest will reduce the interest amount you will deduct on your federal income taxes. Call us at (904) 342-3622 to help you do the math.
Ultimately, for most the total of up-front costs to refinance are made up soon in monthly savings. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (904) 342-3622 to get you started.
Curious about refinancing your home? Give us a call at (904) 342-3622.