When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points under your existing one? Perhaps several years ago that was sage advice, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing has various advantages that often make it worth the initial expenditure many times over.
When you refinance, you may have the ability to lower the interest rate and monthly mortgage payment , perhaps significantly. You might also be able to "cash out" some of the built-up equity in your residence, which you can use to consolidate debts, add on to your home, or finance a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to build up your home equity faster.
Of course, you will have some fees and expenses during the the refinance process. When you refinance, you are paying for most of the same things you were charged for at the time you obtained your current mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying points can get you a lower interest rate. The amount you'll save on the life of the mortgage might be substantial if you've paid up front about three percent of the new loan balance. Please consult a tax professional before acting on hear-say that these points paid may be deducted on your federal income taxes.
An additional cost that a borrower might consider is that a lower rate of interest will lower the interest amount you'll be able to deduct on your federal income taxes. Call us at (760)789-9995 to help you do the math.
Most people find that the monthly savings quickly balance out the initial expenses of a refinance. We'll help you find out what program is the best fit for you, taking into account your cash on hand, how likely you are to sell your home in the next few years, and how refinancing could effect your taxes. Call us at (760)789-9995 to get you started.