Is Refinancing Worth the Cost?
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Some have said that only when your new interest will be at least two points under your current rate, should you refinance your mortgage. That could have been sound advice a while back, but with the fact that refinancing has been costing less recently, it's a good time to consider a new mortgage! Refinancing has some advantages that often make it worth the up-front cost many times over.
Advantages of Refinancing
You could be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced mortgage. You also might have the option of tapping into the equity in your home by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you might also get the chance to build up home equity more quickly by switching to a shorter-term mortgage.
All of these advantages do come with some expense, though. You'll pay the same sort of fees as you did with your present mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying points can help you get a better interest rate. The money you will save on the life of the mortgage may be significant if you've paid up front about three percent of the new loan total. We recommend that you talk to a tax professional before acting on hear-say that any paid points can be deducted on your federal income taxes.
Another expense that borrowers might take into account is that a reduced interest rate will reduce the interest amount you'll be able to deduct from your taxes. Call us at (909) 467-1090 to help you do the math.
Most borrowers find that the monthly savings quickly outweigh the up-front cost of a refinance. We'll help you find out what mortgage program is best for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing may effect your taxes. Call us at (909) 467-1090 to get started.