Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that states you should only refinance if the new interest rate is at least two points lower than your existing rate? That may have been good advice a while back, but with refinancing dropping in cost recently, it's a good time to explore the options of a new loan! A refinanced mortgage is often worth its cost many times over, factoring in the benefits that it brings, as well as a lower interest rate.
Benefits from Refinancing
You could be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with your refinanced mortgage. You also could be given the option of tapping into your home equity by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage loan, giving you the ability to build your home equity quicker.
Fees and Expenses
All these benefits do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for at the time you obtained your existing mortgage loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You might consider paying points to receive a reduced interest rate. The amount you'll save over the life of the mortgage could be substantial if you've paid up front about three percent of the new loan total. We recommend that you consult a tax professional before acting on rumors that any points paid may be deducted on your federal income taxes.
Speaking of taxes, when you bring down your interest rate, it follows that you'll also be reducing the paid interest amount that you can deduct from your taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at (707) 252-2700.
Ultimately, for most the amount of initial costs to refinance are paid back very quickly in monthly savings. We will work with you to determine what loan program is the right fit for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and the effect refinancing may have on your taxes. Call us at (707) 252-2700 to get started.
Want to know more about refinancing? Call us at (707) 252-2700.