Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest is at least two points lower, should you refinance your mortgage. Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it could be time to take a serious look. Refinancing has various advantages that will often make it worth the initial cost a few times over.
Advantages of Refinancing
When you refinance, you could have the ability to lower the interest rate and monthly mortgage payment , sometimes by a lot. You might also have the option to "cash out" some of the built-up equity in your residence, that you can use to consolidate debt, add on to your home, or plan a vacation. You may have the option to refinance to a shorter-term mortgage program, giving you the ability to add to your equity faster.
All of these benefits do cost something, though. You will pay the same sort of fees as you did with your present home loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You might need to pay discount points (prepaid interest) to gain a lower rate of interest. The money you will save on the life of the mortgage loan may be substantial if you've paid up front about 3% of the new loan total. Please consult a tax professional before acting on rumors that any paid points may be deducted on your taxes.
One more cost that a borrower may consider is that a reduced rate of interest will lower the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at (949) 770-6067.
Most borrowers find that the savings per month outweigh the initial cost of refinancing. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your money on hand. Call us at (949) 770-6067 to get you started.