When is Refinancing Worth it?
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Some have said that only when your new interest will be at least 2 points lower, should you refinance your loan. Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing has some advantages that can make it worth the initial cost several times over.
When you refinance, you might be able to lower the interest rate and monthly payment , sometimes significantly. Additionally, you could be given the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You could be able to refinance into a shorter-term mortgage program, enabling you to add to your home equity quicker.
All these benefits do come with some expense, though. You will have the same types of expenses and fees as you did with your current mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can help you get a better interest rate. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the new mortgage can be substantial. You may be told that points can be tax deductible, but because tax regulations are difficult to keep up with, please consult your tax professional before making decisions based on this.
An additional expense that a borrower may take into account is that a lower interest rate will lower the interest amount you'll deduct on your taxes. Call us at (760)789-9995 to help you do the math.
Most borrowers find that the savings each month quickly balance out the up-front expenses of refinancing. We can help you find out your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (760)789-9995 to get you started.