Should I Refinance?

Ever hear the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points lower than your existing one? Maybe that was good advice several years ago, but since refinance costs have been falling recently, it may be a good time to look into it. A refinance can be worth its cost many times over, because of the benefits that can come, as well as a lower interest rate.

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

All of these advantages do cost something, though. You'll have to pay the same types of fees as you did with your existing mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

You could need to pay points (prepaid interest) to attain a more favorable interest rate. When you pay (on average) three percent of the mortgage loan amount initially, your savings for the term of the refinanced mortgage can be substantial. You might be told that these points can be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to consult a tax professional before making decisions based on this.

Speaking of taxes, once you lower your interest rate, of course you'll also be reducing the interest amount that you can deduct on your taxes. This is one more cost that borrowers take into consideration. Call us at (321) 471-2133 to help you do the math.

Most people find that the monthly savings balance out the up-front expenses of refinancing. We will help you figure out what mortgage program is ideal for you, taking into account your cash on hand, how likely you are to sell your house in the near future, and what effect refinancing will probably have on your taxes. Call us at (321) 471-2133 to get started.