Weighing the Options of Refinancing
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Ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points lower than your present one? Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it could be a good time to look into it. A refinance may be worth its cost many times over, factoring in the benefits that come, as well as a reduced interest rate.
You may be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced loan. You also could have the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. With reduced rates, you may also get the chance to build your home equity more quickly by moving to a shorter term mortgage loan.
Expenses and Fees
Of course, you'll have some fees and expenses during your the refinance process. When you refinance, you're paying for basically the same things you were charged for during your original mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might investigate paying points to reduce your interest rate. The amount you'll save on the life of the mortgage loan might be significant if you've paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on rumors that any points paid may be deducted on your taxes.
One more cost that a borrower might consider is that a lower interest rate will lower the interest amount you will deduct from your taxes. We can help you do the math! Call us at (562) 693-5048.
Ultimately, for most borrowers the amount of up-front costs to refinance will be made up very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (562) 693-5048 to get started.
Curious about refinancing your home? Give us a call at (562) 693-5048.