Weighing the Options of Refinancing
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Some have said that only in the case your new interest will be at least 2 points lower, should you refinance your loan. Maybe that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be time to take a serious look. Refinancing your mortgage loan has a number of advantages that can make it worth the initial cost many times over.
Advantages of Refinancing
When you refinance, you might be able to lower your interest rate and monthly mortgage payment amount, perhaps by a lot. You may also have the ability to "cash out" a portion of your equity, that you can use to take care of higher interest debt, improve your home, or plan a vacation. With lower rates, you might also be able to build up home equity faster by moving to a shorter-term loan.
Expenses and Fees
All of these advantages do come with some expense, though. When you refinance, you are paying for most of the same things you were charged for when you got your current mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You might consider paying points to receive a reduced interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the term of the new loan can be substantial. You might be told that points can be tax deductible, but because tax regulations are ever-changing, we urge you to speak with your tax professional before depending on this.
Speaking of taxes, when your interest rate is reduced, of course you'll also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at 714-970-9700.
Most borrowers find that the monthly savings balance out the initial cost of refinancing. We'll work with you to find out which mortgage program is ideal for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing might 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.