When is Refinancing Worth it?
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It has been said that only when your new interest is at least 2 points under your current rate, should you refinance your mortgage. That may have been good advice a while back, but with refinancing dropping in cost recently, it is a good time to think about a new mortgage loan! Refinancing your mortgage loan has a number of advantages that will often make it worth the initial cost a few times over.
When you refinance, you might have the ability to lower your interest rate and monthly mortgage payment amount, sometimes by a lot. You also may be given the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You might be able to refinance to a shorter-term mortgage, giving you the ability to build your equity quicker.
As you probably expect, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for basically the same things you paid for at the time you obtained your original mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can get you a better interest rate. If you pay (on average) three percent of the loan amount at the start, the savings for the term of the new mortgage can be significant. You may hear that points can be tax deductible, but since tax regulations are difficult to keep up with, please consult with a tax professional before making decisions based on this.
Speaking of taxes, when you lower your interest rate, of course you will also be reducing the paid interest amount that you may 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.
In the end, for most borrowers the amount of up-front costs to refinance will be made up very quickly in savings each month. We'll help you determine which loan program is best for you, considering your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing may have on your taxes. Call us at (415) 244-9383 to get started.
Want to know more about refinancing your home? Call us at (415) 244-9383.