Is Refinancing Worth the Cost?

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Some have said that only if your new interest will be 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 over the last few years, it's never the wrong time to explore the options of a new mortgage! Refinancing your mortgage loan has some benefits that often make it worth the up-front cost a few times over.

Benefits from Refinancing

When you refinance, you may be able to lower the interest rate and mortgage payment amount, perhaps significantly. You may also be able to "cash out" some of your home equity, which you are able use to take care of higher interest debts, make home improvements, or finance a vacation. You could be able to refinance into a shorter-term mortgage loan, enabling you to build your home equity quicker.

Expenses and Fees

All of these advantages do come with some expense, though. You'll have to pay the same sort of fees as with your existing mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Doing the Math

You might look into paying points to reduce your interest rate. Your savings over the life of the loan might be significant if you've paid up front about 3% of the new loan total. You may be told that points may be tax deductible, but because tax regulations can be ever-changing, we urge you to consult with a tax professional before depending on this.

Speaking of taxes, once you lower your interest rate, of course you will also be lowering the interest amount that you'll be able to deduct on your taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at (650) 689-5684.

Most people find that the savings each month balance out the up-front cost of refinancing. We will help you figure out which mortgage program is best for you, considering your cash on hand, the likelihood of selling your home in the next few years, and the effect refinancing may have on your taxes. Call us at (650) 689-5684 to get started.

Want to know more about refinancing your home? Call us at (650) 689-5684.

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