Ever hear the old rule of thumb that states you should only refinance if your new interest rate is at least two points under your present rate? Maybe that was sound advice a number of years ago, but since refinance costs have been falling recently, it could be time to look into it. A refinance may be worth its cost several times over, factoring in the advantages that may come, as well as a reduced interest rate.
Advantages
You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You might also be able to “cash out” a portion of your home equity, which you can use to take care of higher interest debts, add on to your home, or finance a vacation. You could have the option to refinance to a shorter-term mortgage program, giving you the ability to add to your equity faster.
Expenses and Fees
Of course, you’ll have some fees and expenses during the process of refinancing. You will pay the same kinds of expenses and fees as with your current mortgage loan. Among these will be settlement costs, an appraisal, lender’s title insurance, underwriting fees, and so on.
Doing the Math
Paying points can help you get a lower interest rate. Your savings on the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on advice that the points paid can be deducted on your federal income taxes.
Speaking of taxes, when your interest rate is lowered, naturally you’ll also be reducing the paid interest amount that you may deduct from your federal income taxes. This is another expense that borrowers take into account. Call us at (352) 222-1135 to help you do the math.
Ultimately, for most borrowers, the total initial costs to refinance are paid back soon in savings each month. We can help you find out your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at (352) 222-1135 to get started.
Curious about refinancing? Call us at (352) 222-1135
