When is Refinancing Worth it?
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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 loan. Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing your mortgage has some benefits that can make it worth the up-front cost many times over.
Advantages of Refinancing
When you refinance, you could be able to reduce the interest rate and monthly mortgage payment , sometimes considerably. You could also have the option to "cash out" some of the built-up equity in your home, that you can use to consolidate debts, add on to your home, or take a vacation. You may be able to refinance into a shorter-term mortgage, giving you the ability to add to your home equity quicker.
As you probably know, you will have some fees and expenses during the process of refinancing. You will have to pay the same types of fees as you did with your current mortgage. These could include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying discount points can result in a better interest rate. The money you'll save over the life of the loan could be significant if you've paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on rumors that the paid points can be deducted on your federal income taxes.
Speaking of taxes, if you reduce your interest rate, naturally you will also be lowering the paid interest amount that you will be able to deduct on your federal income taxes. This is one more expense that some borrowers take into account. We can help you do the math! Call us at (650) 689-5684.
Most people find that the savings per month balance out the initial cost of a refinance. We can help you explore what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (650) 689-5684 to get started.
Want to know more about refinancing? Call us at (650) 689-5684.