When is Refinancing Worth it?
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It has been said that only in the case your new interest is at least 2 points below your current rate, should you refinance your loan. Perhaps that was good advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing your mortgage loan has some advantages that can make it worth the up-front cost many times over.
Advantages
You could be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced mortgage loan. Additionally, you might have the option of tapping into the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage program, giving you the ability to build your equity quicker.
The Cost
Of course, you will have some fees and expenses during your the refinance process. When you refinance, you're paying for a lot of the same things you were charged for at the time you got your existing mortgage loan. Included in your costs 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 lower interest rate. When you pay (on average) three percent of the loan amount up front, your savings for the life of the refinanced loan can be significant. You may be told that the points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, please consult with a tax professional before making decisions based on this.
Another cost that a borrower might consider is that a reduced interest rate will lower 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 borrowers the total of initial costs to refinance will be paid back very quickly in monthly savings. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at (707) 252-2700 to get started.
Want to know more about refinancing? Give us a call: (707) 252-2700.