When is Refinancing Worth it?

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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least 2 points under your current rate? That may have been good advice years ago, but with refinancing dropping in cost over the last few years, it's never the wrong time to explore the options of a new mortgage! A refinance may be worth its cost many times over, considering the benefits that can come, as well as a lower interest rate.

Benefits

You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced loan. Additionally, you might be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You could be able to refinance into a shorter-term mortgage loan, giving you the ability to add to your home equity faster.

Fees and Expenses

As you probably expect, you will have some fees and expenses during your process of refinancing. With your refinance, you're paying for many of the same things you paid for when you got your existing mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Doing the Math

You could need to pay discount points (prepaid interest) to get a better interest rate. The amount you will save over the life of the mortgage loan could be significant if you've paid up front about three percent of the new loan total. Please talk to a tax professional before acting on hear-say that these paid points may be deducted on your taxes.

Another thing about taxes is that once 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 taxes. This is another cost that borrowers take into consideration. Call us at (407) 898-7559 to help you do the math.

All things considered, for most the amount of initial costs to refinance are paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at (407) 898-7559 to get you started.

Curious about refinancing your home? Give us a call: (407) 898-7559.

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