When is Refinancing Worth it?
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Some have said that only when your new interest will be at least 2 points lower, should you refinance your loan. That might have been valid a while back, but with refinancing dropping in cost in recent years, it's a good time to explore the options of a new loan! A refinanced loan is often worth its cost many times over, factoring in the benefits that may come, along with a reduced interest rate.
Advantages of Refinancing
When you refinance, you might have the ability to lower the interest rate and mortgage payment , sometimes significantly. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also get the chance to build your home equity faster by switching to a shorter term mortgage.
Expenses and Fees
All of these advantages do come with some expense, though. You will have to pay the same sort of expenses and fees as you did with your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might need to pay points (prepaid interest) to get a more favorable rate of interest. Your savings over the life of the mortgage could be substantial if you've paid up front about 3% of the new loan total. You might hear that these points can be deducted on your income taxes, but as tax regulations are ever-changing, please consult your tax professional before considering this in your calculations.
Another expense that a borrower might consider is that a reduced rate of interest will lower the interest amount you will be able to deduct on your taxes. Call us at (619) 688-0011 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the up-front cost of refinancing. We will help you figure out what mortgage program is best for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and how refinancing could effect your taxes. Call us at (619) 688-0011 to get started.
Curious about refinancing? Give us a call: (619) 688-0011.