When is Refinancing worth it?
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It has been said that only if your new interest is at least two points below your current rate, should you refinance your loan. Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it may be time to take a serious look. Refinancing has a number of advantages that can make it worth the initial expenditure many times over.
Advantages
You might be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced mortgage. You also could have the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage loan, enabling you to build your equity quicker.
Fees and Expenses
All these advantages do cost something, though. You will have to pay the same types of expenses and fees as with your existing home loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You might offer to pay discount points (prepaid interest) to gain a more favorable rate of interest. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the new mortgage can be significant. Please talk to a tax professional before acting on hear-say that these paid points can be deducted on your taxes.
Speaking of taxes, once your interest rate is reduced, it follows that you'll also be reducing the paid interest amount that you can deduct on your taxes. This is another expense that some borrowers take into consideration. Call us at (408) 293-7878 to help you do the math.
Most people find that the monthly savings outweigh the initial expenses of refinancing. We'll help you find out what mortgage program is ideal for you, considering your cash on hand, how likely you are to sell your house in the near future, and how refinancing will effect your taxes. Call us at (408) 293-7878 to get you started.
Curious about refinancing? Call us at (408) 293-7878.