When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points lower than your existing rate? Maybe that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be a good time to take a serious look. A refinance is often worth its cost many times over, considering the advantages that it brings, along with a lower interest rate.
You could be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with your refinanced mortgage. You may also have the option to "cash out" some of the built-up equity in your residence, which you can use to take care of higher interest debt, improve your home, or finance a vacation. With reduced interest rates, you might also be able to build up home equity more quickly by moving to a shorter-term mortgage loan.
Fees and Expenses
Of course, you'll have to pay for the process of refinancing. When you refinance, you're paying for most of the same things you paid for during your original mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might consider paying points to reduce your interest rate. Your savings over the life of the mortgage might be significant if you have paid up front about three percent of the new loan total. Please consult a tax professional before acting on rumors that these paid points can be deducted on your federal income taxes.
Another expense that borrowers might take into account is that a reduced rate of interest will reduce the interest amount you will be able to deduct on your federal income taxes. We can help you do the math! Call us at (916) 399-5500.
Most borrowers find that the monthly savings outweigh the initial cost of a refinance. We can help you find out what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (916) 399-5500 to get you started.
Curious about refinancing? Give us a call: (916) 399-5500.