When is Refinancing Worth it?
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It has been said that only if your new interest is at least two points under your current rate, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been falling recently, it could be time to look into it. A refinance is often worth its cost many times over, because of the benefits that it brings, along with a lower interest rate.
Benefits from Refinancing
When you refinance, you may have the ability to reduce your interest rate and monthly payment , sometimes considerably. Additionally, you could be given the option of tapping into the equity in your property by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also get the chance to build up home equity more quickly by changing to a shorter-term mortgage.
Of course, you'll have some fees and expenses during the process of refinancing. You will have to pay the same sort of fees as with your present home loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can get you a lower interest rate. If you pay (on average) three percent of the loan amount initially, the savings for the term of the refinanced mortgage can be significant. You may hear that points may be tax deductible, but as tax regulations can be ever-changing, we urge you to consult your tax professional before making any decisions based on this.
One more cost that a borrower may consider is that a lower rate of interest will reduce the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at (562) 693-5048.
Most people find that the monthly savings outweigh the up-front expenses of refinancing. We will work with you to figure out which loan program is the right fit for you, looking at 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 (562) 693-5048 to get started.
Curious about refinancing your home? Call us: (562) 693-5048.