Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least 2 points lower than your existing one? Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing has a number of benefits that will often make it worth the up-front expenditure many times over.
Benefits
When you refinance, you could have the ability to reduce the interest rate and mortgage payment amount, perhaps significantly. You may also be able to "cash out" a portion of your home equity, which you will be able use to consolidate debts, improve your home, or finance a vacation. With lower rates, you might also be able to build up home equity more quickly by changing to a shorter term loan.
The Cost
All these benefits do come with some expense, though. You will pay the same kinds of fees as with your existing home loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might investigate paying points to receive a lower interest rate. Your savings on the life of the mortgage loan might be significant if you have paid up front about three percent of the new loan total. You might have heard that these points can be tax deductible, but because tax regulations are difficult to keep up with, please consult with your tax professional before depending on this.
Speaking of taxes, when you lower your interest rate, it follows that you'll also be reducing the paid interest amount that you will be able to deduct from your federal income taxes. This is another cost that borrowers take into account. We can help you do the math! Call us at 760.975.0255.
Most borrowers find that the savings each month balance out the initial cost of refinancing. We will help you figure out what mortgage program is right for you, looking at your cash on hand, how likely you are to sell your home in the near future, and how refinancing might effect your taxes. Call us at 760.975.0255 to get you started.
Want to know more about refinancing? Give us a call at 760.975.0255.
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