When is Refinancing Worth it?

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Ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least two points lower than your current one? That could have been true years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to explore the options of a new mortgage! Refinancing has a variety of benefits that will often make it worth the initial cost several times over.

Advantages of Refinancing

When you refinance, you could be able to lower your interest rate and monthly payment amount, perhaps by a lot. You could also have the option 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 debts, make home improvements, or finance a vacation. With reduced rates, you may also be able to build your home equity faster by switching to a shorter-term loan.

Expenses and Fees

All these advantages do cost something, though. With your refinance, you are paying for basically the same things you paid for at the time you got your original mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might investigate paying points to be given a reduced interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the life of the new mortgage can be great. You may hear that points may be tax deductible, but since tax regulations are ever-changing, please consult with a tax professional before depending on this.

Another expense that a borrower may consider is that a lower rate of interest will lower the interest amount you will be able to deduct from your taxes. Call us at 562 320-0510 to help you do the math.

Most people find that the monthly savings quickly balance out the initial expenses of refinancing. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 562 320-0510 to get started.

Curious about refinancing your home? Give us a call at 562 320-0510.

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