Weighing the Options of Refinancing
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It has been said that only when your new interest will be at least 2 points below your current rate, should you refinance your mortgage. Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it could be a good time to look into it. Refinancing your loan has a number of benefits that can make it worth the up-front cost several times over.
You may be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage. You may also be able to "cash out" some of the built-up equity in your home, which you may use to consolidate debt, improve your home, or plan a vacation. With reduced rates, you might also get the chance to build up home equity more quickly by moving to a shorter-term mortgage loan.
Fees and Expenses
All these benefits do cost something, though. You will have the same sort of expenses and fees as you did with your existing mortgage. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might think about paying points to be given a better interest rate. Your savings over the life of the mortgage loan may be significant if you have paid up front about 3% of the new loan balance. Please consult a tax professional before acting on hear-say that the points paid can be deducted on your taxes.
Another thing about taxes is that once your interest rate is reduced, it follows that you will also be lowering the paid interest amount that you will be able to deduct from your federal income taxes. This is one more cost that some borrowers consider. We can help you do the math! Call us at 562 320-0510.
All things considered, for most borrowers the total of up-front costs to refinance are made up soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might 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 you started.
Curious about refinancing? Give us a call at 562 320-0510.