Is Refinancing Worth the Cost?
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It has been said that only if your new interest is at least two points lower, should you refinance your loan. That might have been valid years ago, but with the fact that refinancing has been costing less recently, it's never the wrong time to consider a new loan! A refinance is often worth its cost several times over, considering the benefits that come, as well as a reduced interest rate.
When you refinance, you could have the ability to reduce the interest rate and monthly mortgage payment , perhaps by a lot. You may also be able to "cash out" a portion of the built-up equity in your home, that you are able use to consolidate debts, add on to your home, or finance a vacation. You could be able to refinance into a shorter-term mortgage, giving you the ability to add to your equity faster.
Fees and Expenses
Of course, you'll have to pay for your the refinance process. With your refinance, you are paying for a lot of the same things you paid for at the time you obtained your original mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could need to pay points (prepaid interest) to gain a more favorable interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the term of the refinanced loan can be substantial. Please consult a tax professional before acting on rumors that these paid points can be deducted on your taxes.
Speaking of taxes, when you reduce your interest rate, it follows that you'll also be reducing the interest amount that you'll be able to deduct from your taxes. This is one more expense that borrowers take into consideration. Call us at (415) 244-9383 to help you do the math.
Most people find that the monthly savings balance out the up-front expenses of a refinance. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at (415) 244-9383 to get you started.
Curious about refinancing? Give us a call: (415) 244-9383.