Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest will be at least two points below your current rate, should you refinance your loan. That might have been sound advice years ago, but as refinancing has been costing less recently, it is never the wrong time to explore the options of a new mortgage loan! Refinancing has various benefits that will often make it worth the initial cost several times over.
Advantages of Refinancing
When you refinance, you may have the ability to reduce the interest rate and monthly payment amount, sometimes significantly. You could also have the option to "cash out" a portion of your equity, that you may use to take care of higher interest debts, add on to your home, or finance a vacation. You might be able to refinance into a shorter-term mortgage loan, giving you the ability to add to your home equity quicker.
Expenses and Fees
As you probably expect, you will have some fees and expenses during the the refinance process. You will have to pay the same types of expenses and fees as with your existing mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can result in a lower interest rate. The money you'll save on the life of the loan might be substantial if you've paid up front about three percent of the new loan total. You might have heard that points can be tax deductible, but because tax regulations are ever-changing, please consult a tax professional before depending on this.
Another thing about taxes is that once your interest rate is lowered, of course you'll also be reducing the interest amount that you may deduct from your federal income taxes. This is another cost that borrowers take into account. Call us at 714-970-9700 to help you do the math.
Most people find that the monthly savings quickly outweigh the up-front cost of a refinance. We can help you explore your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 714-970-9700 to get you started.
Want to know more about refinancing your home? Give us a call: 714-970-9700.