When is Refinancing Worth it?
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It has been said that only in the case your new interest will be at least 2 points lower, should you refinance your loan. That could have been valid a while back, but with the fact that refinancing has been costing less recently, it's never the wrong time to consider a new mortgage! A refinance is often worth its cost many times over, factoring in the advantages that come, as well as a lower interest rate.
Benefits from Refinancing
You could be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage loan. You could also have the ability to "cash out" some of your home equity, which you may use to consolidate debts, add on to your home, or plan a vacation. With reduced rates, you might also get the chance to build your home equity faster by switching to a shorter term loan.
Of course, you'll have some fees and expenses during your the refinance process. With your refinance, you're paying for basically the same things you were charged for when you got your existing mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might look into paying points to get a better interest rate. Your savings on the life of the mortgage could be substantial if you have paid up front about three percent of the new loan total. You may have heard that these points may be tax deductible, but since tax regulations can be difficult to keep up with, we urge you to 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 paid interest amount that you'll be able to deduct on your taxes. This is one more cost that some borrowers take into consideration. We can help you do the math! Call us at (916) 399-5500.
Ultimately, for most the amount of up-front costs to refinance will be made up very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (916) 399-5500 to get you started.
Want to know more about refinancing? Give us a call: (916) 399-5500.