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WHEN TO REFINANCE

When Should I Refinance?

Have you ever heard, you should only refinance if your new interest rate is at least two points lower? That may have been true years ago, but the cost of refinancing has dropped dramatically in the last few years, it's never the wrong time to think about a new loan! Even with the up-front expenditure taken into account the numerous benefits of refinancing often make it worthwhile many times over. We can help to determine if a California Refinance Mortgage Loan is right for you. Fill out our short refinancing home loan application and our loan consultants will get back to you within one business day with the information you need.


Benefits of Refinancing

One of the main benefits of refinancing your mortgage is lowering your interest rate and monthly payment -- sometimes significantly. You might also be able to take advantage of what is called "cash out" some of the built-up equity in your home, you can use this extra cash to consolidate debt, improve your home, take a vacation -- whatever! With lower interest rates and mortgage balances, you might also be able to build up home equity faster with a shorter-term new mortgage.


Cost of Refinancing

These benefits do have a cost though. When you refinance your home mortgage, you will incur of the same fees you paid for when you obtained your original mortgage. These refinancing fees may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.


If you refinance your original home mortgage loan too quickly you may have to pay a penalty. This will be spelled out in the terms of your existing home mortgage loan. In some areas these penalties are illegal More often than not, in the areas where the penalties are legal they are only applicable during the first year or two of the original home mortgage loan. We will help you figure it out.


Refinancing and Taxes

You may have to pay points up front to get a more favorable interest rate. Normally, if you pay three percent of the loan amount up front, your savings over the life of the new home mortgage loan can be significant. You should be aware that the IRS has recently said that points paid when refinancing your mortgage are not 100% deductable in the year you pay them, unless the refinanced loan is primarily for home improvements. Consult your tax professional before deducting points you pay on your new mortgage from your federal income taxes.


Continuing on the subject of taxes, if you lower your mortgage interest rate, naturally you will be lowering the dollar amount of mortgage interest payments you will be deducting from your federal income taxes. This is another cost that some borrowers consider. We can help you do the math!


Ultimately, you need to determine if the amount you will save monthly is worth paying the up-front costs for. We'll work with you to determine what program is best for you, considering your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing might have on your taxes.