Weighing the Options of Refinancing
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It has been said that only when your new interest will be at least two points below your current rate, should you refinance your mortgage. Maybe several years ago that was good advice, but since refinance costs have been getting lower, it could be a good time to look into it. A refinance is often worth its cost several times over, factoring in the benefits that can come, in addition to a reduced interest rate.
You could be able to lower your interest rate (sometimes by a lot) and have smaller mortgage payments with a refinanced mortgage loan. You might also be able to "cash out" some of your home equity, that you can use to consolidate debts, make home improvements, or plan a vacation. You may be able to refinance into a shorter-term mortgage loan, giving you the ability to build your home equity quicker.
All of these advantages do come with some expense, though. When you refinance, you are paying for basically the same things you were charged for during your current mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might think about paying points to receive a better interest rate. When you pay (on average) three percent of the loan amount at the start, the savings for the life of the new loan can be great. You may have heard that these points may be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to consult with a tax professional before considering this in your calculations.
Another thing about taxes is that if you bring down your interest rate, naturally you will also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that some borrowers consider. We can help you do the math! Call us at (707) 252-2700.
Most borrowers find that the savings each month balance out the up-front expenses of refinancing. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at (707) 252-2700 to get started.
Want to know more about refinancing your home? Give us a call at (707) 252-2700.