Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least two points under your existing one? Maybe several years ago that was wise advice, but since refinance costs have been getting lower, it could be a good time to look into it. A refinanced mortgage loan may be worth its cost several times over, factoring in the benefits that come, as well as a lower interest rate.
You might be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced loan. You may also be able to "cash out" a portion of your home equity, which you are able use to take care of higher interest debts, add on to your home, or take a vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter-term loan.
Fees and Expenses
As you probably know, you'll have some fees and expenses during your process of refinancing. You will have to 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 so on.
Doing the Math
You might investigate paying points to receive a lower interest rate. The amount you will save on the life of the mortgage might be significant if you have paid up front about 3% of the new loan total. You might have heard that the points may be deducted on your income taxes, but because tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before making any decisions based on this.
Another thing about taxes is that if you reduce your interest rate, of course you will also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is another expense that some borrowers take into consideration. Call us at (707) 252-2700 to help you do the math.
Most people find that the savings each month outweigh the up-front expenses of refinancing. We'll help you determine what loan program is ideal for you, considering your cash on hand, the likelihood of selling your home in the next few years, and what effect refinancing could have on your taxes. 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.