Weighing the Options of Refinancing
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Some have said that only in the case your new interest is at least two points lower, should you refinance your mortgage. Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it may be a good time to take a serious look. Refinancing your loan has a variety of benefits that can make it worth the initial expenditure a few times over.
When you refinance, you may be able to reduce your interest rate and monthly mortgage payment , perhaps by a lot. Additionally, you might be given the option of pulling out some of the equity in your property by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance into a shorter-term mortgage program, giving you the ability to build up your home equity quicker.
Fees and Expenses
All of these benefits do come with some expense, though. When you refinance, you are paying for most of the same things you were charged for during your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might need to pay discount points (prepaid interest) to attain a better interest rate. If you pay (on average) three percent of the loan amount at the start, your savings for the term of the refinanced mortgage loan can be substantial. Please consult with a tax professional before acting on advice that these points paid can be deducted on your taxes.
Another thing about taxes is that when your interest rate is reduced, of course you will also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that some 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 initial expenses of refinancing. We can help you find out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (650) 689-5684 to get started.
Curious about refinancing your home? Give us a call: (650) 689-5684.