When is Refinancing Worth it?

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Some have said that only if your new interest will be at least two points lower, should you refinance your loan. Perhaps that was sound advice several years ago, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing has a variety of advantages that can make it worth the initial expenditure many times over.

Benefits from Refinancing

You might be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. Additionally, you might have the option of tapping into your home equity by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to build your home equity faster.

Expenses and Fees

As you probably expect, you will have some fees and expenses during the process of refinancing. You will be charged the same kinds of fees as you did with your current mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Doing the Math

You might need to pay discount points (prepaid interest) to gain a more favorable interest rate. When you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the new loan can be significant. We recommend that you consult with a tax professional before acting on advice that these paid points can be deducted on your federal income taxes.

Another expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct on your taxes. Call us at (562) 693-5048 to help you do the math.

Most people find that the monthly savings outweigh the initial expenses of refinancing. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (562) 693-5048 to get started.

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

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Nationwide Home Loans

NMLS #238531| CA BRE #01017101

8152 Painter Ave., Ste 200
Whittier, CA 90602-3760