When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only refinance if the new interest rate will be at least two points below your existing rate? Maybe that was sound advice several years ago, but since refinance costs have been getting lower, it may be a good time to look into it. Refinancing your mortgage has a number of benefits that often make it worth the up-front cost many times over.

Advantages of Refinancing

When you refinance, you could have the ability to reduce your interest rate and monthly payment , sometimes considerably. You could also have the ability to "cash out" some of the built-up equity in your residence, which you can use to take care of higher interest debts, add on to your home, or plan a vacation. You might have the option to refinance into a shorter-term mortgage program, enabling you to build your equity faster.

The Cost

Of course, you will have some fees and expenses during the process of refinancing. With your refinance, you are paying for basically the same things you paid for during your original mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might investigate paying points to get a lower interest rate. The amount you will save on the life of the mortgage may be significant if you've paid up front about three percent of the new loan total. You might be told that these points can be tax deductible, but as tax regulations can be ever-changing, we urge you to speak with your tax professional before making decisions based on this.

Another thing about taxes is that if you lower your interest rate, of course you will also be reducing the interest amount that you can deduct on your taxes. This is one more cost that borrowers consider. Call us at (209) 357-7000 to help you do the math.

In the end, for most the amount of up-front costs to refinance are made up very quickly in monthly savings. We'll help you find out which mortgage loan program is right for you, considering your cash on hand, the likelihood of selling your home in the next few years, and how refinancing will effect your taxes. Call us at (209) 357-7000 to get you started.

Curious about refinancing? Call us: (209) 357-7000.

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