When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only refinance if the new interest rate will be at least 2 points below your existing one? That may have been true a while back, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage loan! Refinancing has a variety of benefits that can make it worth the up-front cost several times over.

Benefits

You could be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced mortgage. Additionally, you might be given the option of pulling out some of the equity in your property by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage program, enabling you to build up your home equity quicker.

Fees and Expenses

All these benefits do cost something, though. With your refinance, you are paying for a lot of the same things you were charged for at the time you got your existing mortgage. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Doing the Math

You might offer to pay points (prepaid interest) to attain a more favorable rate of interest. Your savings on the life of the mortgage might be substantial if you've paid up front about 3% of the new loan balance. You may be told that these points may be tax deductible, but since tax regulations are difficult to keep up with, we urge you to consult with your tax professional before making any decisions based on this.

Speaking of taxes, if your interest rate is reduced, it follows that you'll also be reducing the interest amount that you'll be able to deduct from your taxes. This is one more expense that borrowers take into account. Call us at (562) 693-5048 to help you do the math.

All things considered, for most the total of initial costs to refinance will be paid back very quickly in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at (562) 693-5048 to get you started.

Curious about refinancing your home? Call us: (562) 693-5048.

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