When is Refinancing Worth it?
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Some have said that only in the case your new interest will be at least two points lower, should you refinance your mortgage. Maybe that was good advice several years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing has various benefits that will often make it worth the initial expenditure several times over.
When you refinance, you might be able to reduce your interest rate and mortgage payment amount, perhaps considerably. You also could be given the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build up home equity faster by moving to a shorter-term mortgage.
Expenses and Fees
All of these benefits do come with some expense, though. When you refinance, you are paying for a lot of the same things you paid for when you got your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can result in a better interest rate. The money you'll save over the life of the mortgage may be substantial if you've paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.
Another expense that borrowers may take into account is that a reduced interest rate will reduce the interest amount you'll deduct on your federal income taxes. Call us at (707) 252-2700 to help you do the math.
Most borrowers find that the savings per month quickly balance out the up-front expenses of refinancing. We will work with you to determine what loan program is right for you, considering 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.
Want to know more about refinancing? Give us a call at (707) 252-2700.