Weighing the Options of Refinancing
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It has been said that only in the case your new interest is at least 2 points lower, should you refinance your mortgage. That may have been good advice years ago, but since refinancing has been costing less in recent years, it is never the wrong time to consider a new mortgage loan! Refinancing has various benefits that will often make it worth the up-front cost several times over.
Benefits from Refinancing
When you refinance, you might be able to lower the interest rate and monthly mortgage payment amount, perhaps significantly. You also might have the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build your home equity faster by moving to a shorter term mortgage loan.
Expenses and Fees
All these advantages do come with some expense, though. With your refinance, you are paying for many of the same things you were charged for during your current mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might need to pay discount points (prepaid interest) to gain a lower interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the life of the new mortgage can be great. Please consult with a tax professional before acting on rumors that these points paid can be deducted on your taxes.
Another cost that a borrower may take into account is that a reduced rate of interest will lower the interest amount you will be able to deduct on your taxes. Call us at (310) 373-7406 to help you do the math.
Ultimately, for most the total of up-front costs to refinance will be made up soon in monthly savings. We will help you find out what mortgage program is best for you, considering your cash on hand, how likely you are to sell your home in the near future, and how refinancing could effect your taxes. Call us at (310) 373-7406 to get started.
Curious about refinancing? Give us a call: (310) 373-7406.