When is Refinancing Worth it?
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Some have said that only if your new interest is at least two points under your current rate, should you refinance your mortgage. That could have been valid years ago, but as refinancing has been costing less recently, it is never the wrong time to think about a new mortgage! A refinanced mortgage loan may be worth its cost several times over, considering the benefits that it brings, as well as a lower interest rate.
Benefits from Refinancing
When you refinance, you could have the ability to reduce the interest rate and monthly mortgage payment , sometimes significantly. You also could have the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build up home equity more quickly by moving to a shorter term mortgage loan.
As you probably expect, you'll have some fees and expenses during the process of refinancing. With your refinance, you're paying for basically the same things you paid for when you obtained your current mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You could need to pay discount points (prepaid interest) to get a better rate of interest. Your savings on the life of the mortgage might be significant if you've paid up front about three percent of the new loan balance. Please consult with a tax professional before acting on advice that any points paid may be deducted on your taxes.
An additional cost that a borrower may take into account is that a lower interest rate will reduce the interest amount you'll deduct from your federal income taxes. Call us at (760)789-9995 to help you do the math.
Most people find that the savings each month quickly balance out the initial expenses of a refinance. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your money on hand. Call us at (760)789-9995 to get you started.