Have you ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points under your current rate? That may have been accurate years ago, but as refinancing has been costing less over the last few years, it is a good time to think about a new mortgage loan! Refinancing your mortgage loan has a number of benefits that can make it worth the up-front cost several times over.
Benefits from Refinancing
You could be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with a refinanced loan. You also may have the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build up home equity faster by changing to a shorter term mortgage loan.
The Cost
Of course, you'll have to pay for your the refinance process. With your refinance, you are paying for basically the same things you paid for when you obtained your original mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying discount points can get you a better interest rate. The money you'll save over the life of the mortgage might be significant if you've paid up front about 3% of the new loan total. Please talk to a tax professional before acting on advice that these paid points can be deducted on your taxes.
One more expense that borrowers might take into account is that a reduced interest rate will reduce the interest amount you'll be able to deduct from your federal income taxes. We can help you do the math!
All things considered, for most people the total of initial costs to refinance are paid back very quickly in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash.
In the Central or San Joaquin Valley and want to know more about refinancing your home? Give us a call: (209) 470-7161or complete the form below.
