When is Refinancing Worth it?

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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least two points lower than your existing rate? Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it could be a good time to look into it. A refinanced mortgage is often worth its cost many times over, considering the benefits that it brings, in addition to a lower interest rate.

Benefits

When you refinance, you may have the ability to reduce your interest rate and mortgage payment amount, perhaps significantly. You could also be able to "cash out" a portion of your equity, which you will be able use to take care of higher interest debts, improve your home, or finance a vacation. With reduced rates, you might also be able to build your home equity faster by switching to a shorter term mortgage loan.

Fees and Expenses

All these advantages do come with some expense, though. You will have to pay the same sort of fees as with your current home loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You could need to pay discount points (prepaid interest) to gain a lower rate of interest. When you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the new mortgage loan can be significant. You may have heard that these points may be deducted on your income taxes, but because tax regulations can be difficult to keep up with, we urge you to consult a tax professional before making any decisions based on this.

An additional expense that borrowers may consider is that a reduced interest rate will lower the interest amount you'll be able to deduct on your federal income taxes. We can help you do the math! Call us at 561-395-4264.

Most borrowers find that the monthly savings outweigh the up-front expenses of refinancing. We will help you determine what program is perfect for you, looking at your cash on hand, how likely you are to sell your house in the near future, and how refinancing may effect your taxes. Call us at 561-395-4264 to get started.

Want to know more about refinancing your home? Call us: 561-395-4264.


Alternative Mortgage Group

80 SW 14 Ave
Boca Raton, FL 33486