Is Refinancing Worth the Cost?


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Some have said that only in the case your new interest is at least two points lower, should you refinance your mortgage. Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing your mortgage has some benefits that will often make it worth the up-front expenditure several times over.

Benefits

You may be able to lower your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced loan. You also could be given the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage, giving you the ability to build up your home equity quicker.

The Cost

As you probably know, you will have some fees and expenses during the the refinance process. When you refinance, you are paying for a lot of the same things you were charged for at the time you got your current mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might investigate paying points to be given a lower interest rate. Your savings over the life of the mortgage may be substantial if you have paid up front about 3% of the new loan total. Please consult with a tax professional before acting on rumors that the paid points may be deducted on your federal income taxes.

One more expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll deduct from your taxes. Call us at (805) 432-4898 to help you do the math.

In the end, for most the total of up-front costs to refinance are made up soon in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (805) 432-4898 to get started.

Curious about refinancing your home? Call us: (805) 432-4898.

CFC Mortgage Bankers CA.DRE#01096950 NMLS#275993 Jeff Baum CA.DRE#01249934 NMLS #297547