Is Refinancing Worth the Cost?
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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least two points under your present one? Maybe that was good advice a number of years ago, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a number of advantages that often make it worth the initial expenditure several times over.
When you refinance, you could be able to lower your interest rate and mortgage payment , perhaps considerably. You also may be given the option of pulling out some of the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also get the chance to build your home equity more quickly by changing to a shorter-term loan.
Fees and Expenses
All of these benefits do cost something, though. When you refinance, you are paying for basically the same things you paid for during your existing mortgage. Included in your costs can 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 better interest rate. Your savings over the life of the mortgage loan may be substantial if you've paid up front about three percent of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that any points paid may be deducted on your taxes.
Speaking of taxes, if you reduce your interest rate, naturally you will also be reducing the interest amount that you may deduct from your taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at 714-970-9700.
Ultimately, for most borrowers the amount of up-front costs to refinance are made up very quickly in monthly savings. We can help you explore your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your cash on hand. Call us at 714-970-9700 to get you started.
Want to know more about refinancing? Give us a call at 714-970-9700.