Is Refinancing Worth the Cost?

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Some have said that only in the case your new interest will be at least 2 points lower, should you refinance your loan. That could have been accurate a while back, but since refinancing has been costing less recently, it's a good time to consider a new mortgage loan! A refinance may be worth its cost several times over, because of the benefits that come, as well as a lower interest rate.

Benefits

You may be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with your refinanced mortgage loan. Additionally, you could have the option of tapping into the equity in your property by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build your home equity faster by switching to a shorter-term mortgage.

The Cost

All these benefits do come with some expense, though. You will have the same types of expenses and fees as you did with your existing mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You could need to pay discount points (prepaid interest) to get a more favorable interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the life of the refinanced mortgage can be great. We recommend that you talk to a tax professional before acting on advice that the points paid can be deducted on your federal income taxes.

Speaking of taxes, if you reduce your interest rate, it follows that you will also be lowering the paid interest amount that you can deduct on your federal income taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at (650) 689-5684.

Most people find that the monthly savings quickly outweigh the initial expenses of refinancing. We will work with you to determine what mortgage loan program is best for you, taking into account your cash on hand, how likely you are to sell your house in the near future, and how refinancing will effect your taxes. Call us at (650) 689-5684 to get you started.

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

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