Weighing the Options of Refinancing

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Ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points under your existing one? That might have been true a while back, but as refinancing has been costing less in recent years, it is a good time to consider a new loan! Refinancing has some advantages that will often make it worth the initial cost 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. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build your home equity more quickly by changing to a shorter term loan.

Fees and Expenses

All of these benefits do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for during your original mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might offer to pay discount points (prepaid interest) to get a lower rate of interest. When you pay (on average) three percent of the loan amount at the start, the savings for the term of the refinanced mortgage loan can be significant. Please consult a tax professional before acting on rumors that the paid points can be deducted on your federal income taxes.

Speaking of taxes, when you bring down your interest rate, naturally you'll also be lowering the paid interest amount that you can deduct from your taxes. This is one more expense that some borrowers consider. Call us at (207) 571-8034 to help you do the math.

Most people find that the savings per month outweigh the up-front cost of a refinance. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (207) 571-8034 to get you started.

Want to know more about refinancing your home? Give us a call: (207) 571-8034.