Weighing the Options of Refinancing
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Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least 2 points below your present rate? That may have been good advice years ago, but with refinancing dropping in cost recently, it's a good time to think about a new loan! Refinancing has a number of benefits that will often make it worth the up-front expenditure many times over.
Advantages
When you refinance, you may be able to lower your interest rate and monthly mortgage payment amount, perhaps by a lot. You also may have the option of tapping into the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you may also get the chance to build your home equity more quickly by changing to a shorter-term mortgage.
The Cost
Of course, you will have some fees and expenses during the process of refinancing. With your refinance, you're paying for basically the same things you paid for during your original mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
You could need to pay points (prepaid interest) to gain a more favorable rate of interest. Your savings on the life of the loan might be significant if you've paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on hear-say that any points paid may be deducted on your federal income taxes.
An additional cost that a borrower may take into account is that a reduced rate of interest will reduce the interest amount you'll be able to deduct on your taxes. We can help you do the math! Call us at (818)645-7035.
All things considered, for most the total of up-front costs to refinance are paid back soon in monthly savings. We will work with you to determine what mortgage program is best for you, considering your cash on hand, how likely you are to sell your house in the near future, and what effect refinancing will probably have on your taxes. Call us at (818)645-7035 to get started.
Want to know more about refinancing? Call us: (818)645-7035.