When is Refinancing Worth it?
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Some have said that only when your new interest will be at least two points below your current rate, should you refinance your mortgage. That may have been true years ago, but since refinancing has been costing less in recent years, it's a good time to consider a new mortgage loan! Refinancing your mortgage loan has a number of benefits that often make it worth the up-front cost a few times over.
When you refinance, you could have the ability to lower your interest rate and mortgage payment , perhaps significantly. Additionally, you might have the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build up home equity more quickly by switching to a shorter-term mortgage loan.
Fees and Expenses
All of these advantages do cost something, though. You will have to pay the same kinds of fees as you did with your existing home loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying discount points can get you a better interest rate. Your savings on the life of the mortgage could be substantial if you've paid up front about three percent of the new loan total. You may hear that the points may be tax deductible, but as tax regulations can be difficult to keep up with, please consult your tax professional before considering this in your calculations.
One more cost that a borrower might take into account is that a reduced rate of interest will reduce the interest amount you'll deduct on your taxes. Call us at 310-379-5997 to help you do the math.
All things considered, for most borrowers the amount of up-front costs to refinance are paid back soon in monthly savings. We can help you find out your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at 310-379-5997 to get you started.
Curious about refinancing? Call us at 310-379-5997.
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