When is Refinancing Worth it?
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Some have said that only in the case your new interest is at least 2 points lower, should you refinance your loan. That could have been valid years ago, but since refinancing has been costing less over the last few years, it's never the wrong time to explore the options of a new mortgage! A refinance may be worth its cost many times over, because of the benefits that it brings, along with a lower interest rate.
When you refinance, you might have the ability to lower your interest rate and mortgage payment amount, perhaps considerably. You also might be given the option of pulling out some of the equity in your house by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you may also be able to build up home equity faster by changing to a shorter term mortgage loan.
All of these advantages do cost something, though. You'll pay the same types of expenses and fees as with your existing home loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You might need to pay discount points (prepaid interest) to get a better rate of interest. The amount you will save on the life of the mortgage loan could be significant if you've paid up front about three percent of the new loan total. You might have heard that points can be tax deductible, but because tax regulations are ever-changing, please consult a tax professional before depending on this.
Another expense that borrowers may take into account is that a lower rate of interest 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.
Most people find that the monthly savings quickly balance out the up-front expenses of refinancing. We'll help you find out which loan program is ideal for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing may effect your taxes. Call us at 310-379-5997 to get started.
Want to know more about refinancing? Call us at 310-379-5997.
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