Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points below your existing rate? That could have been accurate a while back, but with refinancing dropping in cost in recent years, it is a good time to explore the options of a new mortgage! Refinancing your mortgage loan has some benefits that often make it worth the initial expenditure several times over.
Advantages of Refinancing
You may be able to bring down your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced mortgage. You also could have the option of pulling out some of your home equity by "cashing out" some funds to fix up 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 faster by changing to a shorter-term mortgage loan.
All these advantages do come with some expense, though. You'll pay the same sort of expenses and fees as with your present mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Do the Math
You might think about paying points to get a reduced interest rate. Your savings on the life of the loan might be significant if you've paid up front about 3% of the new loan balance. We recommend that you consult with a tax professional before acting on rumors that any paid points may be deducted on your federal income taxes.
Another expense that borrowers may take into account is that a lower interest rate will lower the interest amount you will deduct from your taxes. Call us at (760)789-9995 to help you do the math.
In the end, for most people the total of initial costs to refinance are paid back soon in savings each month. We'll work with you to determine which mortgage program is the right fit for you, looking at your cash on hand, how likely you are to sell your house in the next few years, and how refinancing might effect your taxes. Call us at (760)789-9995 to get you started.