When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points under your present 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 may be worth its cost several times over, factoring in the benefits that come, as well as a reduced interest rate.
You may be able to bring down your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage. You also might be given the option of tapping into the equity in your property by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage, giving you the ability to build your home equity faster.
Expenses and Fees
As you probably know, you will have to pay for your the refinance process. With your refinance, you're paying for basically the same things you were charged for at the time you got your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying discount points can help you attain a better interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the life of the new loan can be great. You might be told that the points can be tax deductible, but since tax regulations are ever-changing, we urge you to speak with your tax professional before depending on this.
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 from your federal income taxes. This is one more expense that borrowers consider. Call us at (760)789-9995 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance will be made up very quickly in monthly savings. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (760)789-9995 to get started.