Weighing the Options of Refinancing

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Some have said that only when your new interest is at least two points below your current rate, should you refinance your loan. Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it could be time to take a serious look. A refinanced mortgage is often worth its cost several times over, because of the advantages that may come, along with a reduced interest rate.

Advantages

You could be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced mortgage. You may also have the option to "cash out" a portion of the built-up equity in your home, that you can use to take care of higher interest debts, add on to your home, or finance a vacation. With lower interest rates, you may also get the chance to build up home equity more quickly by moving to a shorter term mortgage.

The Cost

Of course, you'll have some fees and expenses during your the refinance process. You'll have the same types of expenses and fees as with your present home loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might investigate paying points to reduce your interest rate. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the term of the new mortgage loan can be substantial. We recommend that you talk to a tax professional before acting on rumors that these paid points can be deducted on your taxes.

An additional expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. Call us at (760) 415-7982 to help you do the math.

Most people find that the savings per month outweigh the up-front expenses of a refinance. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (760) 415-7982 to get started.

Want to know more about refinancing? Give us a call: (760) 415-7982.

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