Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least 2 points lower than your current one? That might have been valid a while back, but with refinancing dropping in cost recently, it's a good time to explore the options of a new mortgage! A refinance may be worth its cost several times over, factoring in the benefits that may come, in addition to a reduced interest rate.
Advantages of Refinancing
You may be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced loan. You also might be given the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage, giving you the ability to add to your home equity faster.
Fees and Expenses
As you probably know, you'll have some fees and expenses during the process of refinancing. You'll have the same types of expenses and fees as with your present mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could need to pay discount points (prepaid interest) to get a better interest rate. Your savings over the life of the mortgage could be substantial if you have paid up front about three percent of the new loan total. Please talk to a tax professional before acting on rumors that these points paid can be deducted on your taxes.
Another cost that a borrower may take into account is that a lower rate of interest will reduce the interest amount you will be able to deduct from your taxes. We can help you do the math! Call us at (916) 399-5500.
In the end, for most borrowers the total of initial costs to refinance will be made up very quickly in monthly savings. We will work with you to determine what mortgage program is best for you, considering your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing will have on your taxes. Call us at (916) 399-5500 to get started.
Curious about refinancing your home? Call us: (916) 399-5500.