Weighing the Options of Refinancing
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Some have said that only in the case your new interest will be at least two points lower, should you refinance your loan. That may have been true a while back, but with refinancing dropping in cost recently, it is never the wrong time to think about a new loan! A refinance is often worth its cost many times over, considering the benefits that come, along with a lower interest rate.
You might be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with a refinanced mortgage. You may also have the ability to "cash out" some of the built-up equity in your home, that you may use to take care of higher interest debt, make home improvements, or plan a vacation. With reduced rates, you may also get the chance to build up home equity faster by switching to a shorter-term mortgage loan.
Expenses and Fees
All these advantages do cost something, though. When you refinance, you're paying for basically the same things you paid for during your original mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Do the Math
You might look into paying points to receive a lower interest rate. The money you will save on the life of the mortgage loan could be substantial if you've paid up front about 3% of the new loan balance. You may have heard that points can be tax deductible, but because tax regulations are difficult to keep up with, we urge you to speak with your tax professional before considering this in your calculations.
Another thing about taxes is that if you reduce your interest rate, naturally you will also be lowering the paid interest amount that you may deduct from your taxes. This is one more cost that some borrowers consider. Call us at (714) 827-5125 to help you do the math.
Most people find that the monthly savings quickly outweigh the initial expenses of a refinance. We'll work with you to figure out what loan program is best for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing might effect your taxes. Call us at (714) 827-5125 to get you started.
Curious about refinancing your home? Call us at (714) 827-5125.