When is Refinancing Worth it?

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Some have said that only if your new interest is at least two points under your current rate, should you refinance your mortgage. Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it may be time to take a serious look. Refinancing your mortgage has various advantages that can make it worth the initial cost several times over.

Benefits

When you refinance, you could be able to reduce your interest rate and mortgage payment amount, sometimes significantly. You may also have the option to "cash out" a portion of your home equity, that you are able use to consolidate debt, add on to your home, or take a vacation. With lower rates, you might also get the chance to build your home equity faster by changing to a shorter term mortgage loan.

Expenses and Fees

All of these benefits do come with some expense, though. You'll have to pay the same kinds of expenses and fees as you did with your present mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Doing the Math

You could offer to pay discount points (prepaid interest) to attain a better interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the new mortgage loan can be substantial. Please talk to a tax professional before acting on advice that these paid points can be deducted on your taxes.

Another expense that borrowers might take into account is that a lower interest rate will lower the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at 760-752-4480.

Most people find that the monthly savings quickly balance out the initial cost of a refinance. We will work with you to determine what mortgage loan program is perfect for you, taking into account your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing may have on your taxes. Call us at 760-752-4480 to get you started.

Curious about refinancing your home? Call us at 760-752-4480.

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