When is Refinancing Worth it?
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Some have said that only when your new interest is at least 2 points lower, should you refinance your loan. Maybe that was good advice a number of years ago, but as refinance costs have been falling recently, it may be a good time to take a serious look. Refinancing your mortgage has a number of benefits that can make it worth the initial cost a few times over.
You might be able to bring down your interest rate (sometimes by a lot) and make smaller mortgage payments with a refinanced mortgage. Additionally, you might be given the option of pulling out some of the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With lower rates, you might also get the chance to build up home equity faster by changing to a shorter term mortgage.
Expenses and Fees
All of these advantages do cost something, though. You will pay the same sort of fees as with your present mortgage loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might investigate paying points to reduce your interest rate. If you pay (on average) three percent of the loan amount initially, your savings for the life of the new mortgage can be great. We recommend that you consult with a tax professional before acting on advice that any points paid can be deducted on your taxes.
Another expense that borrowers might take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct on your taxes. Call us at (707) 252-2700 to help you do the math.
Most people find that the monthly savings quickly balance out the up-front expenses of refinancing. We'll help you determine what mortgage loan program is the best fit for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and the effect refinancing might have on your taxes. Call us at (707) 252-2700 to get you started.
Want to know more about refinancing your home? Call us at (707) 252-2700.