When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only refinance if your new interest rate will be at least 2 points lower than your current rate? That might have been true years ago, but with refinancing dropping in cost recently, it's never the wrong time to explore the options of a new mortgage loan! A refinance may be worth its cost several times over, because of the benefits that may come, in addition to a lower interest rate.
You may be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with a refinanced loan. You also may be given the option of pulling out some of your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage, giving you the ability to build your home equity quicker.
All these advantages do cost something, though. With your refinance, you're paying for basically the same things you were charged for during your current mortgage loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might look into paying points to reduce your 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 significant. We recommend that you consult with a tax professional before acting on advice that these points paid may be deducted on your federal income taxes.
Another thing about taxes is that when you bring down your interest rate, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that some borrowers take into account. We can help you do the math! Call us at (949) 837-1559.
Most borrowers find that the monthly savings balance out the initial cost of a refinance. We'll work with you to figure out what mortgage program is right for you, taking into account your cash on hand, how likely you are to sell your residence in the near future, and the effect refinancing will have on your taxes. Call us at (949) 837-1559 to get started.
Curious about refinancing? Call us at (949) 837-1559.