Is Refinancing Worth the Cost?

 


Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least two points under your present one? That may have been sound advice a while back, but with refinancing dropping in cost over the last few years, it's a good time to think about a new mortgage loan! Refinancing your mortgage loan has various benefits that can make it worth the initial expenditure several times over.

Advantages

When you refinance, you might have the ability to lower your interest rate and mortgage payment , sometimes by a lot. You could also be able to "cash out" a portion of your home equity, which you are able use to consolidate debt, add on to your home, or finance a vacation. With lower interest rates, you may also be able to build up home equity faster by moving to a shorter term loan.

Expenses and Fees

All of these advantages do come with some expense, though. You'll pay the same sort of expenses and fees as with your existing home loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

If you refinance your current loan too soon, there might be a penalty to pay. This depends on the terms of your present mortgage loan. However, this sort of penalty could apply just to the initial several years of your mortgage loan. We will help you with the details: contact us at 916-821-7884.

Do the Math

You might think about paying points to receive a better interest rate. The amount you'll save over the life of the mortgage loan may be substantial if you've paid up front about 3% of the new loan balance. Please consult with a tax professional before acting on advice that these points paid can be deducted on your federal income taxes.

Speaking of taxes, once you lower your interest rate, it follows that you will also be lowering the interest amount that you may deduct from your taxes. This is one more cost that some borrowers take into account. We can help you do the math! Call us at 916-821-7884.

All things considered, for most people the amount of initial costs to refinance are paid back soon in savings each month. We'll work with you to determine what mortgage program is the right fit for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing can effect your taxes. Call us at 916-821-7884 to get you started.

In the market for a new mortgage loan? We will be glad to assist you! Give us a call today at 916-821-7884. Ready to begin? Apply Here.

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