When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points below your current rate? Perhaps that was good advice several years ago, but as refinance costs have been getting lower, it may be time to take a serious look. A refinance may be worth its cost several times over, factoring in the advantages that may come, along with a lower interest rate.
When you refinance, you might have the ability to lower your interest rate and monthly payment amount, perhaps by a lot. Additionally, you might be given the option of pulling out some of the equity in your property by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage, giving you the ability to build your home equity faster.
Fees and Expenses
Of course, you will have to pay for the the refinance process. When you refinance, you are paying for basically the same things you were charged for when you got your current mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
Paying points can get you a better interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, your savings for the life of the new mortgage loan can be great. We recommend that you consult a tax professional before acting on hear-say that these paid points can be deducted on your taxes.
Another thing about taxes is that if your interest rate is lowered, it follows that you will also be lowering the paid interest amount that you may deduct on your federal income taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at (916) 399-5500.
All things considered, for most borrowers the total of up-front costs to refinance will be made up very quickly in savings each month. We can help you figure out your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (916) 399-5500 to get you started.
Curious about refinancing? Call us at (916) 399-5500.