When is Refinancing Worth it?
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It has been said that only when your new interest will be at least 2 points lower, should you refinance your mortgage. That might have been true years ago, but as refinancing has been costing less recently, it's a good time to explore the options of a new mortgage loan! Refinancing your loan has a number of advantages that often make it worth the initial expenditure many times over.
Benefits from Refinancing
When you refinance, you may have the ability to reduce the interest rate and monthly payment amount, sometimes considerably. You might also have the ability to "cash out" a portion of your equity, which you can use to consolidate debt, add on to your home, or finance a vacation. With reduced rates, you may also get the chance to build your home equity faster by switching to a shorter term mortgage loan.
Expenses and Fees
As you probably know, you will have to pay for your the refinance process. You will pay the same kinds of expenses and fees as you did with your current home loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
You might investigate paying points to reduce your interest rate. The money you will save over the life of the mortgage loan may be significant if you have paid up front about 3% of the new loan total. You may be told that these points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult with your tax professional before depending on this.
One more cost that borrowers may take into account is that a reduced interest rate will reduce the interest amount you will be able to deduct on your federal income taxes. Call us at (909) 467-1090 to help you do the math.
Most borrowers find that the monthly savings balance out the initial expenses of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at (909) 467-1090 to get you started.