Weighing the Options of Refinancing
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Some have said that only when your new interest will be at least 2 points lower, should you refinance your mortgage. Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it may be a good time to look into it. A refinance is often worth its cost several times over, because of the advantages that come, in addition to a lower interest rate.
You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced loan. You may also have the option to "cash out" some of the built-up equity in your residence, which you can use to consolidate debts, improve your home, or finance a vacation. With reduced interest rates, you may also be able to build your home equity more quickly by changing to a shorter term mortgage.
Fees and Expenses
Of course, you'll have to pay for your the refinance process. You'll be charged the same kinds of fees as you did with your existing mortgage loan. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Do the Math
You might need to pay points (prepaid interest) to get a better interest rate. The money you will save on the life of the mortgage could be substantial if you have paid up front about 3% of the new loan total. You may have heard that the points can be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to consult your tax professional before considering this in your calculations.
Another thing about taxes is that when you lower your interest rate, naturally you'll also be lowering the interest amount that you'll be able to deduct from your taxes. This is another expense that borrowers take into account. Call us at (415) 453-6200 to help you do the math.
Most borrowers find that the monthly savings balance out the initial cost of a refinance. We'll work with you to determine which loan program is ideal for you, looking at your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing might have on your taxes. Call us at (415) 453-6200 to get you started.
Curious about refinancing? Give us a call: (415) 453-6200.