Is Refinancing Worth the Cost?

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It has been said that only when your new interest is at least 2 points lower, should you refinance your loan. Maybe that was sound advice a number of years ago, but since refinance costs have been falling recently, it may be time to take a serious look. A refinanced loan may be worth its cost several times over, because of the advantages that may come, along with a lower interest rate.

Advantages

When you refinance, you may have the ability to lower your interest rate and mortgage payment , sometimes by a lot. You may also have the ability to "cash out" some of your home equity, that you may use to consolidate debts, add on to your home, or take a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to build your home equity quicker.

Expenses and Fees

All these advantages do come with some expense, though. With your refinance, you're paying for most of the same things you paid for during your existing mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

Paying points can get you a better interest rate. Your savings over the life of the mortgage loan might be substantial if you've paid up front about three percent of the new loan total. We recommend that you talk to a tax professional before acting on rumors that these points paid may be deducted on your taxes.

An additional expense that borrowers may take into account is that a reduced rate of interest will lower the interest amount you will be able to deduct on your federal income taxes. Call us at 562 320-0510 to help you do the math.

Ultimately, for most borrowers the amount of initial costs to refinance are paid back soon in savings each month. We can help you find out your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 562 320-0510 to get started.

Want to know more about refinancing? Call us at 562 320-0510.

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