Weighing the Options of Refinancing
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It has been said that only when your new interest will be at least 2 points lower, should you refinance your mortgage. That might have been sound advice a while back, but since refinancing has been costing less recently, it's never the wrong time to consider a new mortgage loan! Refinancing your mortgage has various advantages that will often make it worth the initial cost many times over.
Benefits from Refinancing
You could be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with a refinanced loan. You could also be able to "cash out" a portion of the built-up equity in your residence, which you will be able use to take care of higher interest debts, improve your home, or finance a vacation. You might have the option to refinance into a shorter-term mortgage loan, enabling you to add to your equity faster.
As you probably know, you'll have some fees and expenses during the the refinance process. With your refinance, you're paying for basically the same things you were charged for during your original mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could need to pay discount points (prepaid interest) to attain a more favorable interest rate. When you pay (on average) three percent of the mortgage loan amount at the start, the savings for the life of the new mortgage loan can be great. You may be told that these points can be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult a tax professional before making any decisions based on this.
Another cost that borrowers may consider is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. We can help you do the math! Call us at (760)789-9995.
All things considered, for most people the total of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (760)789-9995 to get you started.