When is Refinancing Worth it?
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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least 2 points under your current one? Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it may be time to look into it. Refinancing your mortgage has various advantages that will often make it worth the initial expenditure several times over.
Benefits from Refinancing
You might be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage. You could also be able to "cash out" a portion of the built-up equity in your home, which you can use to consolidate debts, improve your home, or finance a vacation. You could have the option to refinance into a shorter-term mortgage loan, enabling you to build up your home equity faster.
Fees and Expenses
Of course, you will have to pay for the process of refinancing. You'll pay the same kinds of expenses and fees as you did with your existing home loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might need to pay points (prepaid interest) to gain a lower interest rate. When you pay (on average) 3% of the loan amount up front, the savings for the term of the refinanced mortgage loan can be great. We recommend that you talk to a tax professional before acting on advice that any paid points may be deducted on your federal income taxes.
One more expense that a borrower may consider is that a lower rate of interest will lower the interest amount you will be able to deduct on your taxes. Call us at (707) 252-2700 to help you do the math.
In the end, for most the total of initial costs to refinance will be paid back soon in savings each month. We can help you find out what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (707) 252-2700 to get you started.
Curious about refinancing? Call us: (707) 252-2700.