Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least two points under your current one? That might have been valid a while back, but with refinancing dropping in cost recently, it is a good time to consider a new mortgage loan! A refinanced loan is often worth its cost many times over, because of the benefits that it brings, as well as a lower interest rate.
Advantages of Refinancing
You might be able to bring down your interest rate (sometimes substantially) and reduce your monthly payment amount with your refinanced mortgage loan. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build your home equity more quickly by moving to a shorter-term mortgage loan.
All of these benefits do come with some expense, though. You will have the same sort of expenses and fees as with your present mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can get you a lower interest rate. If you pay (on average) three percent of the loan amount up front, your savings for the term of the refinanced mortgage can be substantial. You may be told that points may be tax deductible, but as tax regulations can be ever-changing, please speak with your tax professional before making any decisions based on this.
Another thing about taxes is that once your interest rate is reduced, it follows that you'll also be lowering the paid interest amount that you may deduct on your taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at (415) 244-9383.
Most borrowers find that the savings per month quickly outweigh the up-front cost of refinancing. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at (415) 244-9383 to get started.
Want to know more about refinancing? Give us a call at (415) 244-9383.