When is Refinancing Worth it?
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Have you ever heard the old rule of thumb that says you should only refinance if your new interest rate is at least 2 points below your present one? That might have been accurate a while back, but since refinancing has been costing less in recent years, it's never the wrong time to consider a new loan! Refinancing your mortgage loan has some benefits that can make it worth the up-front cost a few times over.
Benefits from Refinancing
When you refinance, you could be able to lower your interest rate and monthly payment amount, sometimes significantly. You might also be able to "cash out" some of your home equity, that you will be able use to take care of higher interest debt, improve your home, or take a vacation. With reduced rates, you might also be able to build your home equity faster by moving to a shorter-term loan.
As you probably know, you'll have some fees and expenses during your the refinance process. You will pay the same kinds of expenses and fees as you did with your present mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can help you attain a better interest rate. The money you'll save on the life of the loan might be significant if you have paid up front about three percent of the new loan total. You may have heard that points can be tax deductible, but because tax regulations are ever-changing, please consult a tax professional before considering this in your calculations.
An additional cost that a borrower may consider is that a lower interest rate will lower the interest amount you'll be able to deduct on your federal income taxes. Call us at 714-970-9700 to help you do the math.
All things considered, for most the amount of initial costs to refinance will be paid back soon in monthly savings. We will help you determine what mortgage loan program is the ideal fit for you, looking at your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing will have on your taxes. Call us at 714-970-9700 to get started.
Want to know more about refinancing? Give us a call at 714-970-9700.