Is Refinancing Worth the Cost?
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Some have said that only when your new interest is at least 2 points lower, should you refinance your loan. That may have been accurate years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to think about a new loan! Refinancing your mortgage loan has various benefits that can make it worth the up-front cost a few times over.
Advantages of Refinancing
When you refinance, you might be able to lower your interest rate and mortgage payment amount, sometimes considerably. You also might be given the option of pulling out some of the equity in your property by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build up home equity more quickly by switching to a shorter term mortgage.
All of these advantages do cost something, though. You'll be charged the same types of fees as with your current home loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might think about paying points to get a reduced interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the new mortgage loan can be significant. We recommend that you consult a tax professional before acting on rumors that these paid points may be deducted on your federal income taxes.
Speaking of taxes, when you reduce your interest rate, naturally you'll also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more cost that some borrowers take into account. Call us at 714-970-9700 to help you do the math.
All things considered, for most the amount of up-front costs to refinance will be paid back very quickly in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 714-970-9700 to get started.
Want to know more about refinancing? Call us at 714-970-9700.