When is Refinancing Worth it?
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Ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least two points below your current one? Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it may be a good time to look into it. A refinanced mortgage loan is often worth its cost several times over, factoring in the benefits that come, as well as a reduced interest rate.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced mortgage loan. Additionally, you could be given the option of tapping into the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also get the chance to build up home equity faster by changing to a shorter-term mortgage.
Expenses and Fees
All these benefits do cost something, though. When you refinance, you are paying for a lot of the same things you were charged for during your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can get you a lower interest rate. The amount you will save over the life of the loan might be significant if you've paid up front about three percent of the new loan total. You may hear that points can be tax deductible, but as tax regulations are ever-changing, please consult a tax professional before making any decisions based on this.
Speaking of taxes, if you reduce your interest rate, it follows that you'll also be reducing the interest amount that you will be able to deduct from your taxes. This is another expense that borrowers take into consideration. Call us at (831) 459-6073 to help you do the math.
Most borrowers find that the savings each month quickly outweigh the up-front cost 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 (831) 459-6073 to get started.
Want to know more about refinancing your home? Call us: (831) 459-6073.
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