When is Refinancing Worth it?
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Some have said that only if your new interest is at least two points lower, should you refinance your loan. That may have been valid a while back, but with refinancing dropping in cost recently, it's never the wrong time to explore the options of a new loan! A refinanced loan is often worth its cost several times over, considering the benefits that come, as well as a lower interest rate.
You may be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced loan. Additionally, you could have the option of pulling out some of the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also get the chance to build your home equity more quickly by switching to a shorter term loan.
Fees and Expenses
Of course, you'll have some fees and expenses during your process of refinancing. With your refinance, you're paying for basically the same things you were charged for at the time you obtained your current mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might consider paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the term of the refinanced mortgage loan can be substantial. We recommend that you consult a tax professional before acting on advice that any points paid can be deducted on your federal income taxes.
Speaking of taxes, once your interest rate is lowered, it follows that you'll also be reducing the interest amount that you can deduct from your federal income taxes. This is another expense that borrowers take into account. Call us at (650) 689-5684 to help you do the math.
Most borrowers find that the monthly savings outweigh the up-front expenses of a refinance. We can help you figure out your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at (650) 689-5684 to get you started.
Want to know more about refinancing? Give us a call at (650) 689-5684.