Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate is at least two points lower than your existing one? Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it may be time to take a serious look. Refinancing has various benefits that can make it worth the initial expenditure many times over.

Benefits from Refinancing

When you refinance, you may be able to lower the interest rate and monthly payment , perhaps significantly. You could also have the option to "cash out" some of the built-up equity in your home, that you can use to consolidate debt, add on to your home, or plan a vacation. With lower interest rates, you might also be able to build up home equity more quickly by switching to a shorter term loan.

Fees and Expenses

As you probably expect, you'll have to pay for your process of refinancing. With your refinance, you're paying for many of the same things you were charged for when you got your current mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You might need to pay discount points (prepaid interest) to attain a better rate of interest. If you pay (on average) three percent of the loan amount up front, your savings for the term of the refinanced mortgage loan can be great. Please consult with a tax professional before acting on hear-say that any paid points can be deducted on your federal income taxes.

Another thing about taxes is that if you bring down your interest rate, naturally you'll also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is another expense that some borrowers take into consideration. Call us at (415) 244-9383 to help you do the math.

Most people find that the monthly savings outweigh the initial cost of a refinance. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (415) 244-9383 to get you started.

Want to know more about refinancing your home? Give us a call at (415) 244-9383.

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