Weighing the Options of Refinancing
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Some have said that only when your new interest will be at least two points under your current rate, should you refinance your mortgage. That could have been true years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to think about a new loan! A refinanced loan may be worth its cost several times over, because of the advantages that it brings, along with a reduced interest rate.
Benefits
When you refinance, you could have the ability to lower your interest rate and monthly payment , sometimes by a lot. You may also have the ability to "cash out" a portion of the built-up equity in your home, which you may use to take care of higher interest debt, improve your home, or take a vacation. You might be able to refinance to a shorter-term mortgage loan, giving you the ability to build up your home equity quicker.
Fees and Expenses
All of these benefits do cost something, though. You'll have the same kinds of expenses and fees as you did with your present home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might need to pay discount points (prepaid interest) to gain a lower rate of interest. Your savings on the life of the mortgage loan could be significant if you have paid up front about 3% of the new loan balance. Please consult with a tax professional before acting on rumors that these paid points can be deducted on your federal income taxes.
Speaking of taxes, once your interest rate is lowered, it follows that you'll also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is one more cost that some borrowers take into account. Call us at (818)645-7035 to help you do the math.
Ultimately, for most people the amount of initial costs to refinance are paid back soon in savings each month. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at (818)645-7035 to get started.
Curious about refinancing? Call us at (818)645-7035.