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It has been said that only when your new interest will be at least two points below your current rate, should you refinance your mortgage. Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing your mortgage has a variety of advantages that will often make it worth the up-front cost many times over.
You could be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced mortgage. You may also have the ability to "cash out" some of your home equity, that you can use to take care of higher interest debts, improve your home, or finance a vacation. You may have the option to refinance to a shorter-term mortgage program, enabling you to build your home equity quicker.
Fees and Expenses
All of these advantages do come with some expense, though. You will have the same types of fees as with your existing mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might offer to pay points (prepaid interest) to attain a more favorable rate of interest. When you pay (on average) 3% of the loan amount initially, the savings for the term of the new mortgage loan can be great. Please consult with a tax professional before acting on rumors that these paid points may be deducted on your federal income taxes.
Another expense that a borrower might consider is that a lower rate of interest will lower the interest amount you'll deduct from your taxes. We can help you do the math! Call us at (562) 981-7700.
All things considered, for most the amount of initial costs to refinance are made up very quickly in savings each month. We will help you determine which mortgage loan program is right for you, taking into account your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing will have on your taxes. Call us at (562) 981-7700 to get started.
Curious about refinancing? Call us at (562) 981-7700.