Is Refinancing Worth the Cost?
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Ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least 2 points below your current one? That might have been good advice years ago, but since refinancing has been costing less in recent years, it is a good time to think about a new mortgage loan! Refinancing has various advantages that often make it worth the up-front expenditure several times over.
You might be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with a refinanced mortgage loan. You could also have the ability to "cash out" a portion of your home equity, which you will be able use to take care of higher interest debt, make home improvements, or finance a vacation. You might be able to refinance to a shorter-term mortgage loan, enabling you to build your equity faster.
Fees and Expenses
Of course, you'll have to pay for the process of refinancing. With your refinance, you're paying for basically the same things you were charged for when you obtained your existing mortgage. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You might think about paying points to be given a lower interest rate. If you pay (on average) three percent of the loan amount up front, the savings for the term of the refinanced mortgage can be great. You might be told that the points can be deducted on your income taxes, but as tax regulations can be ever-changing, please consult with a tax professional before considering this in your calculations.
Another cost that a borrower may take into account is that a lower interest rate will lower the interest amount you'll deduct on your taxes. We can help you do the math! Call us at (909) 467-1090.
All things considered, for most borrowers the amount of initial costs to refinance will be made up very quickly in monthly savings. We will help you determine which mortgage loan program is the ideal fit for you, taking into account your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing could have on your taxes. Call us at (909) 467-1090 to get started.