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 will be at least 2 points below your current rate? That could have been true years ago, but as refinancing has been costing less over the last few years, it's a good time to consider a new mortgage! A refinance may be worth its cost many times over, factoring in the advantages that it brings, along with a lower interest rate.
Advantages of Refinancing
When you refinance, you may have the ability to lower your interest rate and monthly mortgage payment , perhaps considerably. You could also have the option to "cash out" some of the built-up equity in your residence, that you may use to take care of higher interest debt, make home improvements, or finance a vacation. You may be able to refinance into a shorter-term mortgage program, giving you the ability to add to your home equity quicker.
Expenses and Fees
All these benefits do cost something, though. When you refinance, you are paying for basically the same things you paid for when you got your original mortgage loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Do the Math
Paying discount points can get you a lower interest rate. The money you will save on the life of the loan might be significant if you've paid up front about three percent of the new loan total. We recommend that you consult with a tax professional before acting on hear-say that any paid points can be deducted on your taxes.
An additional cost that borrowers might consider is that a reduced interest rate will reduce the interest amount you will be able to deduct from your taxes. We can help you do the math! Call us at 714-970-9700.
Most people find that the savings each month outweigh the initial cost of a refinance. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 714-970-9700 to get started.
Curious about refinancing? Give us a call: 714-970-9700.