Weighing the Options of Refinancing

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Ever hear the old rule of thumb that states you should only refinance if your new interest rate is at least two points lower than your current one? Perhaps that was sound advice a number of years ago, but as refinance costs have been getting lower, it could be a good time to take a serious look. A refinanced loan is often worth its cost many times over, factoring in the advantages that come, along with a lower interest rate.

Benefits

When you refinance, you might have the ability to lower your interest rate and mortgage payment , sometimes by a lot. You also may have the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you might also get the chance to build up home equity faster by changing to a shorter term mortgage.

Expenses and Fees

As you probably expect, you will have to pay for the the refinance process. You'll have the same types of fees as with your current mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

You might think about paying points to reduce your interest rate. The amount you will save over the life of the mortgage loan may be significant if you have paid up front about 3% of the new loan balance. You might have heard that these points may be tax deductible, but because tax regulations are difficult to keep up with, please speak with a tax professional before making any decisions based on this.

An additional expense that a borrower might take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct from your federal income taxes. We can help you do the math! Call us at (727) 478-2797.

Most borrowers find that the monthly savings balance out the up-front expenses of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (727) 478-2797 to get you started.

Want to know more about refinancing? Give us a call at (727) 478-2797.

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