Weighing the Options of Refinancing
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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points below your existing rate? That might have been good advice years ago, but with the fact that refinancing has been costing less recently, it's never the wrong time to consider a new mortgage loan! A refinanced mortgage loan is often worth its cost several times over, considering the benefits that it brings, as well as a lower interest rate.
Advantages
You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage. You also could have the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower rates, you may also get the chance to build your home equity more quickly by switching to a shorter-term mortgage.
Expenses and Fees
All of these advantages do come with some expense, though. When you refinance, you're paying for most of the same things you paid for during your existing mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying discount points can help you attain a better interest rate. If you pay (on average) 3% of the loan amount initially, your savings for the term of the refinanced mortgage can be substantial. Please consult a tax professional before acting on hear-say that these paid points may be deducted on your federal income taxes.
Another thing about taxes is that when your interest rate is reduced, it follows that you'll also be lowering the paid interest amount that you can deduct from your federal income taxes. This is one more expense that borrowers take into account. Call us at 415-381-7006 to help you do the math.
All things considered, for most people the total of up-front costs to refinance are made up very quickly in savings each month. We will work with you to determine what program is the ideal fit for you, taking into account your cash on hand, how likely you are to sell your residence in the near future, and how refinancing might effect your taxes. Call us at 415-381-7006 to get started.
Curious about refinancing your home? Call us at 415-381-7006.
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