Weighing the Options of Refinancing
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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate is at least 2 points under your current rate? Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it could be a good time to look into it. Refinancing your mortgage has various advantages that often make it worth the initial cost many times over.
Advantages
You could be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with your refinanced mortgage loan. Additionally, you may have the option of pulling out some of your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build up home equity faster by changing to a shorter-term loan.
Expenses and Fees
As you probably know, you'll have some fees and expenses during the process of refinancing. With your refinance, you are paying for most of the same things you were charged for during your existing mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might think about paying points to reduce your interest rate. The amount you will save over the life of the loan might be significant if you've paid up front about three percent of the new loan total. We recommend that you consult a tax professional before acting on advice that the paid points may be deducted on your taxes.
Speaking of taxes, if your interest rate is reduced, of course you will also be reducing the paid interest amount that you will be able to deduct on your taxes. This is one more cost that some borrowers take into consideration. Call us at 949-367-1317 to help you do the math.
Ultimately, for most people the total of initial costs to refinance will be paid back very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 949-367-1317 to get started.
Curious about refinancing your home? Give us a call: 949-367-1317.
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