Weighing the Options of Refinancing
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Ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least 2 points lower than your present rate? That could have been good advice a while back, but with the fact that refinancing has been costing less over the last few years, it's never the wrong time to think about a new mortgage loan! A refinance can be worth its cost many times over, factoring in the advantages that it brings, as well as a lower interest rate.
Advantages of Refinancing
When you refinance, you may be able to reduce your interest rate and monthly payment , sometimes significantly. You may also be able to "cash out" a portion of the built-up equity in your home, which you are able use to take care of higher interest debt, improve your home, or take a vacation. With reduced rates, you might also be able to build up home equity more quickly by moving to a shorter-term loan.
Fees and Expenses
As you probably expect, you'll have to pay for your process of refinancing. When you refinance, you're paying for basically the same things you paid for when you obtained your existing mortgage loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might consider paying points to reduce your interest rate. Your savings on the life of the loan might be significant if you have paid up front about 3% of the new loan balance. We recommend that you consult with a tax professional before acting on advice that these paid points can be deducted on your taxes.
Speaking of taxes, once your interest rate is lowered, it follows that you'll also be lowering the interest amount that you may deduct from your federal income taxes. This is one more cost that borrowers take into account. Call us at 949-380-6837 to help you do the math.
Most people find that the monthly savings outweigh the initial expenses of a refinance. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at 949-380-6837 to get started.
Curious about refinancing your home? Call us: 949-380-6837.
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