When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only refinance if the new interest rate is at least 2 points under your present rate? That may have been true a while back, but with the fact that refinancing has been costing less over the last few years, it is never the wrong time to consider a new mortgage! Refinancing your mortgage loan has some advantages that often make it worth the initial cost many times over.
Advantages of Refinancing
You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You also might be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also be able to build up home equity more quickly by moving to a shorter term mortgage loan.
All of these advantages do come with some expense, though. You will pay the same kinds of expenses and fees as with your existing mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Do the Math
You might investigate paying points to be given a reduced interest rate. If you pay (on average) three percent of the loan amount at the start, your savings for the life of the new mortgage loan can be substantial. You might hear that points may be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to consult a tax professional before depending on this.
An additional cost that borrowers may take into account is that a lower interest rate will lower the interest amount you will be able to deduct on your taxes. We can help you do the math! Call us at (909) 467-1090.
In the end, for most the total of up-front costs to refinance are made up soon in monthly savings. We can help you figure out your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (909) 467-1090 to get started.