When is Refinancing Worth it?

Curious about refinancing? Call us: (831) 459-6073.

Ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least 2 points below your current rate? That may have been sound advice years ago, but with refinancing dropping in cost recently, it's never the wrong time to explore the options of a new mortgage! Refinancing has a variety of advantages that can make it worth the up-front expenditure a few times over.

Benefits

When you refinance, you could be able to reduce your interest rate and monthly mortgage payment , perhaps significantly. You also might be given the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you might also get the chance to build your home equity more quickly by switching to a shorter term loan.

The Cost

Of course, you will have to pay for your process of refinancing. You'll have the same sort of expenses and fees as you did with your present home loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

You could have to make a penalty payment if you refinance your existing mortgage loan too quickly. It all depends on your current mortgage loan contract. These penalties may just apply for the first couple of years. We'll help you sort through the details: contact us at (831) 459-6073.

Do the Math

You might need to pay points (prepaid interest) to gain a better rate of interest. The amount you'll save over the life of the loan could be significant if you have paid up front about three percent of the new loan total. 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.

One more cost that a borrower may consider is that a lower interest rate will reduce the interest amount you will deduct on your federal income taxes. Call us at (831) 459-6073 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the initial cost of a refinance. We'll work with you to determine what mortgage loan program is the ideal fit for you, considering your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing might have on your taxes. Call us at (831) 459-6073 to get you started.

Shopping for a mortgage? We will be glad to help! Give us a call at (831) 459-6073. Ready to begin? Apply Now.