Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least two points under your current rate? Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing your loan has various advantages that will often make it worth the initial cost a few times over.
You might be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced mortgage loan. You also might be given the option of pulling out some of the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage, enabling you to build up your equity quicker.
Expenses and Fees
As you probably know, you'll have some fees and expenses during your the refinance process. You'll have the same types of fees as you did with your current home loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might investigate paying points to receive a reduced interest rate. When you pay (on average) 3% of the loan amount at the start, your savings for the term of the refinanced mortgage loan can be great. You may be told that the points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, please consult your tax professional before considering this in your calculations.
Another thing about taxes is that once you bring down your interest rate, of course you will also be reducing the interest amount that you'll be able to deduct from your taxes. This is another expense that borrowers take into consideration. We can help you do the math! Call us at (707) 252-2700.
Ultimately, for most the amount of up-front costs to refinance will be paid back very quickly in monthly savings. We'll help you determine what program is best for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing will probably 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.