When is Refinancing Worth it?
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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least 2 points under your present one? Maybe several years ago that was good advice, but as refinance costs have been falling recently, it could be time to look into it. Refinancing has some advantages that can make it worth the up-front expenditure several times over.
When you refinance, you may be able to reduce the interest rate and monthly payment , perhaps by a lot. You may also have the option to "cash out" some of the built-up equity in your residence, that you may use to take care of higher interest debts, make home improvements, or plan a vacation. You might have the option to refinance to a shorter-term mortgage program, giving you the ability to add to your equity faster.
Fees and Expenses
Of course, you'll have to pay for your process of refinancing. With your refinance, you are paying for most of the same things you were charged for at the time you got your current mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can result in a lower interest rate. Your savings on the life of the mortgage could be substantial if you have paid up front about 3% of the new loan balance. You may hear that points can be tax deductible, but because tax regulations are ever-changing, please consult with your tax professional before depending on this.
Another thing about taxes is that once your interest rate is lowered, it follows that you'll also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is another cost that borrowers take into consideration. Call us at (904) 342-3622 to help you do the math.
All things considered, for most people the total of initial costs to refinance are paid back very quickly in savings each month. We'll help you determine which program is the ideal fit for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and the effect refinancing may have on your taxes. Call us at (904) 342-3622 to get you started.
Want to know more about refinancing? Give us a call at (904) 342-3622.