Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that states you should only refinance if your new interest rate is at least two points under your existing rate? Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it may be a good time to look into it. Refinancing your loan has a number of benefits that will often make it worth the up-front cost many times over.
Advantages
When you refinance, you may be able to lower the interest rate and monthly mortgage payment amount, sometimes considerably. You also might be given the option of tapping into the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You might have the option to refinance to a shorter-term mortgage program, enabling you to add to your equity quicker.
Fees and Expenses
All of these advantages do come with some expense, though. When you refinance, you are paying for basically the same things you paid for when you got your existing mortgage. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
Paying discount points can get you a better interest rate. The money you'll save over the life of the loan could be significant if you have paid up front about three percent of the new loan total. You may be told that points can be deducted on your income taxes, but since tax regulations are difficult to keep up with, we urge you to consult a tax professional before depending on this.
An additional cost that a borrower may consider is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. We can help you do the math! Call us at 714-970-9700.
All things considered, for most borrowers the total of up-front costs to refinance are made up very quickly in savings each month. We will help you determine which mortgage loan program is best for you, taking into account your cash on hand, the likelihood of selling your home in the near future, and the effect refinancing may have on your taxes. Call us at 714-970-9700 to get you started.
Want to know more about refinancing your home? Give us a call at 714-970-9700.