When is Refinancing Worth it?
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It has been said that only if your new interest will be at least 2 points under your current rate, should you refinance your loan. Perhaps several years ago that was wise advice, but since refinance costs have been falling recently, it may be a good time to look into it. Refinancing your mortgage has a number of benefits that can make it worth the initial cost many times over.
When you refinance, you might have the ability to lower the interest rate and monthly mortgage payment , perhaps considerably. You could also be able to "cash out" some of your equity, which you may use to consolidate debts, improve your home, or finance a vacation. With lower interest rates, you may also get the chance to build your home equity more quickly by changing to a shorter-term mortgage.
All these advantages do cost something, though. When you refinance, you are paying for a lot of the same things you paid for during your existing mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can result in a better interest rate. If you pay (on average) 3% of the loan amount initially, the savings for the term of the refinanced loan can be substantial. Please consult with a tax professional before acting on hear-say that the paid points may be deducted on your taxes.
Another thing about taxes is that once your interest rate is reduced, it follows that you'll also be reducing the interest amount that you'll be able to deduct from your taxes. This is another expense that borrowers take into account. Call us at (707) 252-2700 to help you do the math.
Ultimately, for most the amount of up-front costs to refinance will be made up soon in savings each month. We will work with you to determine which mortgage program is best for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, 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.