When is Refinancing Worth it?
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It has been said that only if your new interest will be at least 2 points lower, should you refinance your mortgage. Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it may be a good time to look into it. A refinance may be worth its cost many times over, factoring in the benefits that come, as well as a reduced interest rate.
Benefits
You could be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You might also be able to "cash out" a portion of the built-up equity in your home, that you will be able use to take care of higher interest debt, add on to your home, or finance a vacation. You might have the option to refinance to a shorter-term mortgage program, enabling you to build your home equity quicker.
Expenses and Fees
As you probably expect, you will have to pay for your the refinance process. You will be charged the same kinds of expenses and fees as with your current home loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might consider paying points to reduce your interest rate. The amount you'll save on the life of the mortgage loan could be significant if you have paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on advice that the points paid may be deducted on your federal income taxes.
Speaking of taxes, once your interest rate is reduced, it follows that you'll also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that some borrowers consider. Call us at (818)645-7035 to help you do the math.
Most people find that the monthly savings quickly balance out the up-front expenses of refinancing. We can help you figure out your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (818)645-7035 to get started.
Want to know more about refinancing your home? Give us a call at (818)645-7035.