When is Refinancing Worth it?
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Have you ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least 2 points lower than your current rate? That might have been true a while back, but with the fact that refinancing has been costing less recently, it's a good time to think about a new mortgage loan! Refinancing your mortgage loan has some benefits that often make it worth the initial expenditure many times over.
Advantages of Refinancing
You may be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with your refinanced mortgage. Additionally, you could have the option of pulling out some of your home equity by "cashing out" a sum of 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 up home equity more quickly by moving to a shorter-term mortgage loan.
Expenses and Fees
As you probably know, you will have some fees and expenses during the process of refinancing. With your refinance, you're paying for basically the same things you paid for during your current mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might look into paying points to reduce your interest rate. The money you'll save on the life of the mortgage could be significant if you've paid up front about three percent of the new loan total. You might hear that the points can be tax deductible, but because tax regulations are ever-changing, we urge you to consult your tax professional before depending on this.
Speaking of taxes, once your interest rate is lowered, of course you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is another expense that some borrowers take into account. We can help you do the math! Call us at (909) 467-1090.
Ultimately, for most people the amount of up-front costs to refinance are paid back very quickly in savings each month. We'll help you find out what loan program is right for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing might effect your taxes. Call us at (909) 467-1090 to get started.