Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest will be at least 2 points under your current rate, should you refinance your loan. Perhaps that was sound advice several years ago, but since refinance costs have been getting lower, it could be time to take a serious look. A refinance is often worth its cost many times over, because of the advantages that it brings, as well as a lower interest rate.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced mortgage loan. You also could have the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build up home equity more quickly by switching to a shorter term mortgage loan.
Fees and Expenses
Of course, you will have some fees and expenses during your process of refinancing. With your refinance, you are paying for basically the same things you paid for when you obtained your original mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can result in a better interest rate. Your savings over the life of the mortgage loan might be significant if you've paid up front about three percent of the new loan balance. We recommend that you consult a tax professional before acting on advice that these paid points may be deducted on your federal income taxes.
Another thing about taxes is that when your interest rate is lowered, of course you will also be lowering the paid interest amount that you can deduct on your federal income taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at 714-508-7905.
Most people find that the savings each month quickly outweigh the initial cost of a refinance. We will help you determine which program is the best fit for you, considering your cash on hand, the likelihood of selling your house in the near future, and what effect refinancing will probably have on your taxes. Call us at 714-508-7905 to get you started.