Weighing the Options of Refinancing
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Have you ever heard the pearl of wisdom that states you should only refinance if your new interest rate is at least two points lower than your present rate? Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing your mortgage has some benefits that often make it worth the up-front cost many times over.
Benefits from Refinancing
When you refinance, you could have the ability to reduce your interest rate and monthly payment , sometimes considerably. Additionally, you may have the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. You could have the option to refinance into a shorter-term mortgage loan, giving you the ability to add to your home equity quicker.
Expenses and Fees
As you probably know, you'll have to pay for the the refinance process. When you refinance, you are paying for basically the same things you were charged for at the time you obtained your original mortgage loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might look into paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount at the start, the savings for the life of the new loan can be substantial. You might have heard that the points may be deducted on your income taxes, but since tax regulations are ever-changing, please consult your tax professional before depending on this.
Another thing about taxes is that once you lower your interest rate, of course you will also be lowering the interest amount that you'll be able to deduct on your taxes. This is another cost that some borrowers take into account. Call us at (909) 467-1090 to help you do the math.
Most borrowers find that the savings per month quickly outweigh the initial expenses of a refinance. We can help you explore your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at (909) 467-1090 to get started.