When is Refinancing Worth it?
Curious about refinancing your home? Call us at 661-489-LEND (5363).
It has been said that only in the case your new interest will be at least 2 points below your current rate, should you refinance your loan. That could have been accurate years ago, but as refinancing has been costing less in recent years, it is a good time to think about a new mortgage loan! A refinanced mortgage loan is often worth its cost many times over, because of the advantages that come, as well as a reduced interest rate.
You could be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced loan. Additionally, you might have the option of pulling out some of the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage program, enabling you to add to your equity quicker.
All these benefits do cost something, though. When you refinance, you are paying for many of the same things you paid for at the time you obtained your original mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
When you refinance your present mortgage loan too quickly, there might be a penalty . That depends on the rules of your existing mortgage loan. Some of the penalties just apply to the first year or two. We'll help you figure it out: contact us at 661-489-LEND (5363).
Doing the Math
Paying points can result in a lower interest rate. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the new loan can be significant. Please talk to a tax professional before acting on rumors that these paid points may be deducted on your federal income taxes.
Another thing about taxes is that when you reduce your interest rate, of course you'll also be reducing the interest amount that you will be able to deduct from your taxes. This is one more expense that some borrowers take into account. Call us at 661-489-LEND (5363) to help you do the math.
Most borrowers find that the savings per month outweigh the initial cost of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at 661-489-LEND (5363) to get started.
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