When is Refinancing Worth it?

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate is at least two points lower than your current one? Perhaps several years ago that was sage advice, but since refinance costs have been getting lower, it could be a good time to look into it. A refinanced loan is often worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate.

Advantages

You may be able to lower your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced mortgage loan. You may also be able to "cash out" some of the built-up equity in your residence, which you will be able use to consolidate debts, improve your home, or finance a vacation. With lower interest rates, you might also be able to build up home equity faster by moving to a shorter term mortgage loan.

Fees and Expenses

As you probably expect, you will have some fees and expenses during the the refinance process. You will be charged the same kinds of fees as with your existing mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

You might need to pay discount points (prepaid interest) to get a lower interest rate. If you pay (on average) three percent of the loan amount initially, your savings for the life of the refinanced mortgage loan can be substantial. Please consult with a tax professional before acting on hear-say that the paid points may be deducted on your taxes.

Another cost that a borrower might take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct on your federal income taxes. We can help you do the math! Call us at (415) 244-9383.

Most borrowers find that the savings each month balance out the initial cost of a refinance. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (415) 244-9383 to get started.

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

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