When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points under your current one? That could have been sound advice a while back, but with refinancing dropping in cost recently, it's never the wrong time to think about a new mortgage! A refinanced mortgage loan may be worth its cost several times over, factoring in the advantages that it brings, along with a reduced interest rate.
When you refinance, you may be able to lower your interest rate and monthly mortgage payment amount, perhaps considerably. Additionally, you may be given the option of pulling out some of the equity in your house by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage program, giving you the ability to build up your home equity quicker.
Expenses and Fees
Of course, you'll have to pay for the the refinance process. You'll pay the same sort of fees as with your present mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying points can get you a lower interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, the savings for the term of the refinanced loan can be significant. We recommend that you consult with a tax professional before acting on hear-say that the points paid can be deducted on your federal income taxes.
An additional expense that borrowers may take into account is that a reduced rate of interest will lower the interest amount you will deduct from your taxes. Call us at 714-970-9700 to help you do the math.
Most people find that the savings per month balance out the initial cost of refinancing. We will work with you to figure out which loan program is right for you, looking at your cash on hand, how likely you are to sell your house in the near future, and how refinancing will effect your taxes. Call us at 714-970-9700 to get you started.
Want to know more about refinancing? Give us a call: 714-970-9700.