Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points below your existing rate? Maybe that was good advice a number of years ago, but as refinance costs have been getting lower, it could be a good time to take a serious look. A refinanced loan may be worth its cost several times over, factoring in the advantages that come, as well as a lower interest rate.
Benefits from Refinancing
When you refinance, you might be able to reduce the interest rate and mortgage payment , perhaps by a lot. You may also have the option to "cash out" a portion of the built-up equity in your residence, that you are able use to consolidate debts, make home improvements, or take a vacation. You might have the option to refinance into a shorter-term mortgage, giving you the ability to add to your home equity faster.
All of these advantages do come with some expense, though. When you refinance, you're paying for many of the same things you paid for during your current mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
Paying points can result in a better interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the life of the refinanced mortgage loan can be great. You may be told that these points may be tax deductible, but as tax regulations can be ever-changing, we urge you to consult a tax professional before considering this in your calculations.
Another expense that borrowers might take into account is that a reduced rate of interest will reduce the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at (415) 244-9383.
All things considered, for most borrowers the total of up-front costs to refinance will be made up very quickly in savings each month. We will work with you to determine what mortgage loan program is best for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing can effect your taxes. Call us at (415) 244-9383 to get you started.
Want to know more about refinancing your home? Call us: (415) 244-9383.