When is Refinancing Worth it?

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It has been said that only in the case your new interest will be at least 2 points lower, should you refinance your loan. That could have been true years ago, but since refinancing has been costing less over the last few years, it's never the wrong time to think about a new loan! Refinancing has various advantages that can make it worth the initial cost a few times over.


You may be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with a refinanced loan. Additionally, you may be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build up home equity faster by switching to a shorter-term loan.

The Cost

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

Do the Math

You might need to pay points (prepaid interest) to get a lower interest rate. Your savings on the life of the loan could be significant if you have paid up front about three percent of the new loan balance. You may hear that points can be tax deductible, but as tax regulations can be difficult to keep up with, please speak with your tax professional before considering this in your calculations.

Speaking of taxes, once you reduce your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that some borrowers take into consideration. We can help you do the math! Call us at 305-800-3863.

In the end, for most the total of up-front costs to refinance are paid back very quickly in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at 305-800-3863 to get started.

Curious about refinancing your home? Call us at 305-800-3863.

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