When is Refinancing Worth it?

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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least 2 points under your current one? That could have been sound advice a while back, but with refinancing dropping in cost recently, it is never the wrong time to consider a new mortgage! Refinancing has a number of benefits that will often make it worth the up-front expenditure many times over.

Benefits

You could be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage loan. You also might be given the option of pulling out some of the equity in your home by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You could have the option to refinance into a shorter-term mortgage program, enabling you to build your equity faster.

Fees and Expenses

Of course, you will have some fees and expenses during your the refinance process. You'll pay the same sort of expenses and fees as with your present mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might need to pay discount points (prepaid interest) to attain a more favorable interest rate. The amount you'll save on the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan total. You may have heard that the points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.

Another cost that a borrower may take into account is that a lower interest rate will reduce the interest amount you will be able to deduct from your federal income taxes. Call us at (207) 571-8034 to help you do the math.

Most borrowers find that the monthly savings balance out the initial cost of refinancing. We will work with you to figure out what mortgage program is perfect for you, taking into account your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing will have on your taxes. Call us at (207) 571-8034 to get you started.

Curious about refinancing your home? Give us a call: (207) 571-8034.