Is Refinancing Worth the Cost?
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Some have said that only if your new interest will be at least 2 points lower, should you refinance your mortgage. Maybe several years ago that was wise advice, but since refinance costs have been getting lower, it could be time to take a serious look. Refinancing your mortgage loan has a variety of advantages that will often make it worth the up-front expenditure several times over.
Benefits from Refinancing
When you refinance, you may be able to reduce the interest rate and mortgage payment amount, sometimes considerably. Additionally, you may be given the option of pulling out some of the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage, enabling you to build your home equity quicker.
Expenses and Fees
As you probably expect, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for basically the same things you were charged for during your current mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You might need to pay points (prepaid interest) to attain a better rate of interest. Your savings over the life of the mortgage may be significant if you have paid up front about 3% of the new loan total. You may hear that these points may be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to speak with your tax professional before considering this in your calculations.
Speaking of taxes, once you reduce your interest rate, naturally you will also be lowering the interest amount that you'll be able to deduct from your taxes. This is one more cost that borrowers take into consideration. Call us at (707) 252-2700 to help you do the math.
All things considered, for most people the amount of initial costs to refinance are made up very quickly in monthly savings. We'll work with you to determine what mortgage loan program is the ideal fit for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing will have on your taxes. Call us at (707) 252-2700 to get you started.
Curious about refinancing? Give us a call at (707) 252-2700.