Want to know more about refinancing? Call us: 415-999-2439.
Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least two points lower than your current one? Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it could be time to look into it. Refinancing has some benefits that will often make it worth the initial expenditure a few times over.
Benefits
When you refinance, you might be able to lower your interest rate and monthly mortgage payment , sometimes significantly. You may also have the option to “cash out” some of your equity, that you may use to take care of higher interest debts, add on to your home, or take a vacation. You could be able to refinance into a shorter-term mortgage loan, enabling you to build up your equity quicker.
The Cost
Of course, you’ll have some fees and expenses during your the refinance process. You will be charged the same kinds of fees as with your existing mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender’s title insurance, settlement costs, and other fees.
When you refinance your present mortgage too quickly, you might have a penalty . It depends on the rules of your existing mortgage loan. Some of the penalties just apply for the first year or two of the mortgage. We will help you figure it out: contact us at 415-999-2439.
Doing the Math
You might need to pay discount points (prepaid interest) to attain a lower interest rate. The money you will save over the life of the mortgage loan could be significant if you’ve paid up front about three percent of the new loan total. Please consult a tax professional before acting on advice that these paid points can be deducted on your federal income taxes.
Another thing about taxes is that once you reduce your interest rate, it follows that you’ll also be reducing the paid interest amount that you will be able to deduct from your federal income taxes. This is one more expense that some borrowers take into consideration. Call us at 415-999-2439 to help you do the math.
All things considered, for most the amount of up-front costs to refinance will be made up very quickly in savings each month. We will work with you to find out which loan program is right for you, taking into account your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing might have on your taxes. Call us at 415-999-2439 to get you started.