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Weighing the Options of Refinancing

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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 may have been valid years ago, but as refinancing has been costing less recently, it is a good time to consider a new mortgage loan! A refinance can be worth its cost many times over, because of the advantages that come, along with a lower interest rate.

Advantages

When you refinance, you may have the ability to reduce your interest rate and mortgage payment amount, perhaps by a lot. You could also have the ability to "cash out" a portion of the built-up equity in your residence, which you can use to take care of higher interest debts, make home improvements, or finance a vacation. You could be able to refinance into a shorter-term mortgage program, enabling you to build your equity quicker.

Fees and Expenses

All these advantages do come with some expense, though. When you refinance, you are paying for basically the same things you paid for during your existing mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You could need to pay points (prepaid interest) to gain a better interest rate. The amount you will save on the life of the mortgage loan may be substantial if you have paid up front about three percent of the new loan total. You may have heard that the points may be deducted on your income taxes, but as tax regulations can be ever-changing, please consult with a tax professional before making any decisions based on this.

Speaking of taxes, if your interest rate is reduced, of course you'll also be reducing the paid interest amount that you may deduct on your federal income taxes. This is another cost that borrowers consider. Call us at (909) 467-1090 to help you do the math.

Ultimately, for most the total of up-front costs to refinance will be made up soon in monthly savings. We can help you find out what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at (909) 467-1090 to get you started.

Curious about refinancing your home? Give us a call at (909) 467-1090.

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