Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate will be at least 2 points lower than your present rate? Perhaps that was sound advice several years ago, but as refinance costs have been falling recently, it could be time to take a serious look. A refinanced loan may be worth its cost several times over, factoring in the benefits that can come, along with a lower interest rate.

Advantages

When you refinance, you might have the ability to reduce the interest rate and monthly mortgage payment amount, perhaps considerably. You could also have the option to "cash out" a portion of your home equity, that you are able use to consolidate debt, improve your home, or take a vacation. You could be able to refinance into a shorter-term mortgage program, giving you the ability to build up your equity quicker.

Fees and Expenses

All these advantages do cost something, though. You'll pay the same kinds of fees as you did with your existing mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Doing the Math

Paying points can result in a lower interest rate. The amount you'll save over the life of the mortgage may be substantial if you've paid up front about three percent of the new loan total. You may be told that these points can be deducted on your income taxes, but since tax regulations are ever-changing, please consult with a tax professional before making decisions based on this.

Another thing about taxes is that when you reduce your interest rate, it follows that you will also be reducing the interest amount that you will be able to deduct on your federal income taxes. This is another expense that some borrowers take into account. We can help you do the math! Call us at (707) 252-2700.

Most borrowers find that the monthly savings balance out the initial cost of a refinance. We can help you find out your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (707) 252-2700 to get you started.

Want to know more about refinancing? Call us: (707) 252-2700.

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