When is Refinancing Worth it?
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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least two points below your current one? That may have been valid years ago, but with refinancing dropping in cost recently, it's a good time to think about a new mortgage loan! Refinancing your mortgage loan has a variety of advantages that often make it worth the initial expenditure many times over.
You could be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced loan. Additionally, you could be given the option of pulling out some of your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance to a shorter-term mortgage, enabling you to add to your home equity faster.
Of course, you'll have to pay for your the refinance process. With your refinance, you're paying for many of the same things you paid for at the time you got your current mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could offer to pay discount points (prepaid interest) to attain a lower rate of interest. Your savings over the life of the mortgage loan may be significant if you've paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on hear-say that the points paid may be deducted on your taxes.
Another cost that borrowers might consider is that a reduced interest rate will lower the interest amount you will deduct on your taxes. We can help you do the math! Call us at (916) 399-5500.
In the end, for most the total of initial costs to refinance will be made up very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your money on hand. Call us at (916) 399-5500 to get started.
Want to know more about refinancing? Call us at (916) 399-5500.