When is Refinancing Worth it?
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Ever hear the pearl of wisdom that says you should only consider refinancing if your new interest rate will be at least two points below your present rate? Maybe that was good advice several years ago, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has a number of benefits that can make it worth the up-front expenditure several times over.
Advantages
When you refinance, you could have the ability to lower your interest rate and monthly mortgage payment , sometimes by a lot. You also might be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build your home equity faster by switching to a shorter-term mortgage loan.
Expenses and Fees
All these advantages do come with some expense, though. You will pay the same types of expenses and fees as you did with your current mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can get you a better interest rate. The amount you'll save over the life of the mortgage may be substantial if you've paid up front about three percent of the new loan total. You may hear that points can be tax deductible, but because tax regulations are difficult to keep up with, we urge you to speak with your tax professional before depending on this.
Another thing about taxes is that if you lower your interest rate, it follows that you will also be lowering the paid interest amount that you can deduct on your taxes. This is another cost that some borrowers take into account. We can help you do the math! Call us at (818) 920-3522.
Most borrowers find that the savings each month quickly balance out the up-front cost of a refinance. We can help you explore what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (818) 920-3522 to get started.
Want to know more about refinancing? Give us a call at (818) 920-3522.