Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only refinance if the new interest rate will be at least two points under your present rate? Maybe that was sound advice several years ago, but as refinance costs have been getting lower, it may be a good time to look into it. A refinanced loan is often worth its cost several times over, considering the advantages that can come, as well as a lower interest rate.

Benefits from Refinancing

You could be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced loan. You may also have the ability to "cash out" some of your home equity, which you will be able use to consolidate debt, improve your home, or finance a vacation. You may be able to refinance to a shorter-term mortgage program, giving you the ability to add to your home equity faster.

The Cost

As you probably expect, you will have to pay for the the refinance process. With your refinance, you're paying for a lot of the same things you were charged for when you got your original mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to get a reduced interest rate. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the term of the new mortgage loan can be great. You may have heard that these points can be tax deductible, but because tax regulations can be difficult to keep up with, we urge you to consult your tax professional before making decisions based on this.

Another thing about taxes is that when you lower your interest rate, of course you'll also be lowering the interest amount that you will be able to deduct from your taxes. This is one more expense that borrowers take into account. Call us at (415) 244-9383 to help you do the math.

Most borrowers find that the monthly savings outweigh the initial cost of refinancing. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (415) 244-9383 to get started.

Want to know more about refinancing? Call us: (415) 244-9383.

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