Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least 2 points lower than your current rate? That could have been accurate years ago, but with refinancing dropping in cost recently, it is a good time to consider a new mortgage! Refinancing has some benefits that will often make it worth the initial expenditure a few times over.

Advantages

When you refinance, you may have the ability to lower the interest rate and monthly mortgage payment amount, sometimes significantly. You may also have the option to "cash out" a portion of the built-up equity in your home, which you are able use to take care of higher interest debts, add on to your home, or finance a vacation. With reduced interest rates, you might also be able to build up home equity faster by moving to a shorter term mortgage.

Fees and Expenses

Of course, you'll have to pay for the process of refinancing. When you refinance, you are paying for many of the same things you paid for when you got your current mortgage loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the new mortgage loan can be significant. Please talk to a tax professional before acting on hear-say that any paid points can be deducted on your federal income taxes.

Another cost that borrowers may consider is that a reduced interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at (714) 935-0775 to help you do the math.

Most people find that the monthly savings outweigh the initial cost of refinancing. We'll work with you to find out what program is right for you, looking at your cash on hand, the likelihood of selling your house in the near future, and how refinancing can effect your taxes. Call us at (714) 935-0775 to get started.

Want to know more about refinancing your home? Call us: (714) 935-0775.

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