When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least two points lower than your present rate? That may have been sound advice years ago, but with refinancing dropping in cost recently, it is a good time to consider a new loan! A refinanced mortgage is often worth its cost several times over, considering the advantages that it brings, along with a reduced interest rate.


You could be able to lower your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage. You could also have the option to "cash out" some of the built-up equity in your residence, which you can use to consolidate debts, improve your home, or take a vacation. You could be able to refinance into a shorter-term mortgage program, giving you the ability to add to your equity faster.

Fees and Expenses

All of these advantages do cost something, though. When you refinance, you are paying for basically the same things you were charged for during your existing mortgage loan. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You could need to pay points (prepaid interest) to gain a more favorable interest rate. The money you'll save on the life of the mortgage might be significant if you've paid up front about three percent of the new loan balance. We recommend that you consult a tax professional before acting on rumors that these paid points may be deducted on your taxes.

Speaking of taxes, once you reduce your interest rate, of course you'll also be lowering the interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that borrowers consider. Call us at 6507631924 to help you do the math.

Most borrowers find that the savings each month balance out the up-front cost of a refinance. We'll help you find out what loan program is the right fit for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing will effect your taxes. Call us at 6507631924 to get you started.

Want to know more about refinancing your home? Give us a call at 6507631924.

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Norcal Capital Group, Inc

1369 El Camino Real
Millbrae, CA 94030