When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least 2 points below your present rate? Perhaps that was good advice several years ago, but as refinance costs have been falling recently, it could be time to take a serious look. A refinance may be worth its cost several times over, considering the advantages that it brings, in addition to a reduced interest rate.


When you refinance, you might have the ability to reduce the interest rate and monthly payment amount, perhaps by a lot. You might also be able to "cash out" a portion of your equity, that you will be able use to consolidate debts, make home improvements, or plan a vacation. You could be able to refinance into a shorter-term mortgage loan, enabling you to build your equity faster.

The Cost

As you probably expect, you'll have some fees and expenses during the the refinance process. With your refinance, you're paying for a lot of the same things you were charged for when you obtained your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might think about paying points to receive a lower interest rate. Your savings on the life of the mortgage loan might be substantial if you've paid up front about 3% of the new loan total. Please consult with a tax professional before acting on hear-say that these points paid may be deducted on your federal income taxes.

Speaking of taxes, when your interest rate is reduced, naturally you will also be reducing the paid interest amount that you may deduct on your taxes. This is one more expense that borrowers take into account. Call us at (415) 244-9383 to help you do the math.

All things considered, for most the amount of initial costs to refinance will be made up soon in monthly savings. We'll work with you to figure out which mortgage loan program is right for you, considering your cash on hand, how likely you are to sell your home in the near future, and how refinancing will effect your taxes. Call us at (415) 244-9383 to get you started.

Curious about refinancing your home? Call us at (415) 244-9383.

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