When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least 2 points lower than your present rate? Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it may be time to take a serious look. Refinancing has various benefits that will often make it worth the initial cost many times over.
Benefits from Refinancing
When you refinance, you may have the ability to reduce your interest rate and monthly payment , sometimes considerably. You might also have the ability to "cash out" some of your equity, which you will be able use to consolidate debts, improve your home, or plan a vacation. With reduced rates, you might also get the chance to build up home equity faster by switching to a shorter-term mortgage.
The Cost
As you probably expect, you will have some fees and expenses during your process of refinancing. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Do the Math
You might investigate paying points to be given a better interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the term of the new loan can be substantial. We recommend that you consult with a tax professional before acting on advice that these paid points can be deducted on your taxes.
Speaking of taxes, once your interest rate is reduced, naturally you will also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is another cost that borrowers consider. Call us at (707) 252-2700 to help you do the math.
Ultimately, for most the total of initial costs to refinance are paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (707) 252-2700 to get started.
Curious about refinancing your home? Give us a call: (707) 252-2700.