Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that states you should only consider refinancing if the new interest rate is at least 2 points under your current one? That might have been accurate years ago, but with refinancing dropping in cost over the last few years, it is never the wrong time to think about a new loan! Refinancing your loan has some benefits that will often make it worth the up-front expenditure many times over.
You could be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with your refinanced mortgage. Additionally, you may have the option of pulling out some of your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. You may be able to refinance into a shorter-term mortgage loan, enabling you to add to your equity quicker.
Expenses and Fees
All these advantages do come with some expense, though. When you refinance, you're paying for basically the same things you paid for during your current mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Do the Math
You might offer to pay points (prepaid interest) to get a lower rate of interest. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the new mortgage loan can be substantial. You may have heard that the points may be tax deductible, but since tax regulations are difficult to keep up with, we urge you to consult with your tax professional before considering this in your calculations.
An additional expense that borrowers may consider is that a lower interest rate will reduce the interest amount you will be able to deduct on your federal income taxes. Call us at 310-379-5997 to help you do the math.
In the end, for most borrowers the total of initial costs to refinance are made up very quickly in monthly savings. We can help you find out what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 310-379-5997 to get started.
Curious about refinancing your home? Call us at 310-379-5997.
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