Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points lower than your current rate? That may have been accurate a while back, but as refinancing has been costing less recently, it's a good time to think about a new mortgage loan! A refinanced loan may be worth its cost many times over, considering the advantages that may come, along with a reduced interest rate.
You may be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced loan. You may also have the option to "cash out" a portion of the built-up equity in your residence, which you can use to consolidate debts, add on to your home, or finance a vacation. With reduced rates, you may also get the chance to build up home equity more quickly by switching to a shorter term mortgage loan.
All these advantages do come with some expense, though. You will have the same kinds of expenses and fees as you did with your current mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might consider paying points to be given a reduced interest rate. Your savings on the life of the mortgage could be substantial if you have paid up front about three percent of the new loan balance. Please consult with a tax professional before acting on rumors that any points paid can be deducted on your taxes.
An additional expense that borrowers might consider is that a lower interest rate will reduce the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at 714-891-0266.
All things considered, for most people the amount of up-front costs to refinance will be made up very quickly in monthly savings. We'll work with you to find out which program is ideal for you, looking at your cash on hand, how likely you are to sell your house in the next few years, and the effect refinancing will have on your taxes. Call us at 714-891-0266 to get you started.
Want to know more about refinancing? Give us a call: 714-891-0266.