When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate is at least 2 points under your existing rate? Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it may be a good time to look into it. Refinancing has various benefits that will often make it worth the up-front cost many times over.


You could be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced mortgage. You might also be able to "cash out" some of the built-up equity in your residence, which you can use to take care of higher interest debt, improve your home, or take a vacation. With reduced rates, you may also get the chance to build up home equity more quickly by changing to a shorter term loan.

Expenses and Fees

All of these benefits do come with some expense, though. You will pay the same types of fees as with your current home loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

Paying points can get you 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 these points can be tax deductible, but because tax regulations can be ever-changing, please speak with your tax professional before considering this in your calculations.

Another thing about taxes is that if your interest rate is reduced, it follows that you will also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that some borrowers consider. We can help you do the math! Call us at (407) 898-7559.

Most people find that the monthly savings balance out the initial cost of a refinance. We can help you explore what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at (407) 898-7559 to get you started.

Want to know more about refinancing your home? Give us a call at (407) 898-7559.

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