When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate is at least 2 points lower than your present one? That could have been good advice a while back, but with refinancing dropping in cost in recent years, it is never the wrong time to consider a new mortgage loan! Refinancing your mortgage has some advantages that often make it worth the up-front cost a few times over.
When you refinance, you might be able to lower your interest rate and mortgage payment amount, perhaps considerably. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also get the chance to build up home equity faster by moving to a shorter term loan.
Of course, you'll have some fees and expenses during the the refinance process. With your refinance, you are paying for basically the same things you were charged for during your original mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could offer to pay points (prepaid interest) to attain a better interest rate. If you pay (on average) three percent of the mortgage loan amount up front, your savings for the life of the refinanced mortgage loan can be great. You may be told that the points may be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.
One more expense that a borrower might take into account is that a lower rate of interest will lower the interest amount you will be able to deduct from your federal income taxes. We can help you do the math! Call us at 561-395-4264.
All things considered, for most the amount of up-front costs to refinance are paid back very quickly in monthly savings. We'll work with you to find out what mortgage program is perfect for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and what effect refinancing may have on your taxes. Call us at 561-395-4264 to get started.
Want to know more about refinancing your home? Give us a call: 561-395-4264.