When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least two points under your current one? That could have been true years ago, but with the fact that refinancing has been costing less over the last few years, it's never the wrong time to explore the options of a new mortgage loan! Refinancing your mortgage has various benefits that can make it worth the initial expenditure many times over.

Advantages

You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced loan. You also may have the option of pulling out some of the equity in your house by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build up home equity faster by switching to a shorter term mortgage loan.

Expenses and Fees

Of course, you will have to pay for the the refinance process. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You could need to pay points (prepaid interest) to get a more favorable interest rate. The amount you'll save over the life of the loan could be substantial if you've paid up front about 3% of the new loan total. Please talk to a tax professional before acting on advice that any paid points can be deducted on your taxes.

Another thing about taxes is that once your interest rate is reduced, of course you will also be reducing the paid interest amount that you may deduct on your taxes. This is another cost that some borrowers take into account. We can help you do the math! Call us at (727) 743-1620.

Ultimately, for most the amount of up-front costs to refinance will be paid back soon in savings each month. We'll work with you to determine which mortgage loan program is the best fit for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing could have on your taxes. Call us at (727) 743-1620 to get started.

Want to know more about refinancing? Give us a call: (727) 743-1620.

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