When is Refinancing Worth it?
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Some have said that only in the case your new interest will be at least two points below your current rate, should you refinance your loan. Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing your mortgage has various advantages that will often make it worth the initial expenditure several times over.
When you refinance, you might have the ability to reduce your interest rate and monthly mortgage payment , perhaps significantly. You also could be given the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage loan, giving you the ability to build up your home equity faster.
Fees and Expenses
Of course, you'll have to pay for your process of refinancing. You will be charged the same types of fees as with your present home loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might offer to pay points (prepaid interest) to attain a better rate of interest. If you pay (on average) 3% of the loan amount initially, your savings for the life of the refinanced mortgage can be significant. You may have heard that the points may be deducted on your income taxes, but as tax regulations are ever-changing, please speak with your tax professional before considering this in your calculations.
Another cost that a borrower may take into account is that a lower rate of interest will reduce the interest amount you will be able to deduct on your taxes. We can help you do the math! Call us at (707) 252-2700.
All things considered, for most the amount of up-front costs to refinance are made up very quickly in savings each month. We'll work with you to find out what mortgage loan program is right for you, considering your cash on hand, how likely you are to sell your residence 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.