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 will be at least two points lower than your existing one? That could have been good advice years ago, but with refinancing dropping in cost in recent years, it is a good time to consider a new mortgage! Refinancing your mortgage loan has some advantages that can make it worth the initial expenditure a few times over.
When you refinance, you may be able to lower the interest rate and mortgage payment amount, sometimes considerably. Additionally, you may be given the option of tapping into the equity in your property by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build your home equity faster by switching to a shorter-term mortgage loan.
Fees and Expenses
Of course, you'll have to pay for your the refinance process. You will pay the same types of fees as you did with your existing home loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could need to pay points (prepaid interest) to get a better rate of interest. Your savings on the life of the mortgage loan might be substantial if you've paid up front about three percent of the new loan total. Please consult a tax professional before acting on advice that these paid points can be deducted on your federal income taxes.
Another thing about taxes is that if your interest rate is lowered, naturally you will also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that some borrowers consider. We can help you do the math! Call us at (415) 244-9383.
Most people find that the savings each month quickly balance out the up-front cost of refinancing. We can help you find out your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at (415) 244-9383 to get started.
Curious about refinancing your home? Give us a call: (415) 244-9383.