Weighing the Options of Refinancing
Curious about refinancing? Give us a call: 714-737-6717.
Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points below your current one? That may have been valid a while back, but with refinancing dropping in cost in recent years, it's a good time to think about a new mortgage! Refinancing your mortgage has a variety of benefits that will often make it worth the up-front expenditure many times over.
You could be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with your refinanced mortgage loan. Additionally, you may be given the option of pulling out some of the equity in your home by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower interest rates, you may also be able to build up home equity more quickly by changing to a shorter-term mortgage.
All these advantages do cost something, though. When you refinance, you're paying for many of the same things you were charged for during your existing mortgage. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
You could be required to make a penalty payment if you refinance your present loan too soon. It all depends on your existing loan contract. However, this type of penalty may apply just to the first several years of your mortgage. We'll help you with the details: contact us at 714-737-6717.
Doing the Math
You could offer to pay discount points (prepaid interest) to get a better rate of interest. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the life of the refinanced mortgage can be great. You may be told that the points can be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to consult your tax professional before considering this in your calculations.
Speaking of taxes, once you reduce your interest rate, it follows that you will also be lowering the interest amount that you may deduct from your taxes. This is another cost that borrowers consider. Call us at 714-737-6717 to help you do the math.
Ultimately, for most the amount of initial costs to refinance will be made up soon in monthly savings. We will help you figure out which mortgage loan program is the best fit for you, considering your cash on hand, how likely you are to sell your house in the near future, and what effect refinancing could have on your taxes. Call us at 714-737-6717 to get you started.
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