When is Refinancing Worth it?
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It has been said that only when your new interest is at least 2 points lower, should you refinance your loan. That could have been good advice years ago, but with the fact that refinancing has been costing less recently, it's a good time to explore the options of a new loan! Refinancing your mortgage loan has a number of advantages that often make it worth the up-front cost many times over.
You could be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced loan. Additionally, you might have the option of pulling out some of the equity in your property by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage program, enabling you to build up your home equity faster.
As you probably expect, you will have to pay for the process of refinancing. When you refinance, you're paying for a lot of the same things you were charged for when you got your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could offer to pay discount points (prepaid interest) to attain a lower rate of interest. Your savings over the life of the mortgage may be significant if you have paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that the points paid may be deducted on your taxes.
Speaking of taxes, when you reduce your interest rate, naturally you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at 310-379-5997.
Ultimately, for most borrowers the total of up-front costs to refinance will be made up soon in savings each month. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 310-379-5997 to get you started.
Curious about refinancing? Call us: 310-379-5997.
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