When is Refinancing Worth it?
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Looking for mortgage advice? We'll be glad to discuss our many mortgage solutions! Call us at (207) 571-8034. Ready to get started? Apply Now.
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Ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least two points under your current one? Maybe that was sound advice several years ago, but since refinance costs have been falling recently, it may be a good time to look into it. A refinance can be worth its cost several times over, because of the advantages that it brings, along with a reduced interest rate.
Benefits
You may be able to bring down your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced loan. You also may be given the option of pulling out some of the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also get the chance to build your home equity faster by changing to a shorter-term mortgage loan.
Fees and Expenses
All these benefits do come with some expense, though. With your refinance, you are paying for basically the same things you were charged for during your current mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can help you get a better interest rate. If you pay (on average) three percent of the loan amount initially, the savings for the term of the new mortgage loan can be great. You might hear that these points may be tax deductible, but since tax regulations are difficult to keep up with, please consult a tax professional before considering this in your calculations.
Speaking of taxes, when your interest rate is reduced, it follows that you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at (207) 571-8034.
Most people find that the savings per month quickly outweigh the up-front cost of refinancing. We'll help you determine what mortgage program is ideal for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and the effect refinancing may have on your taxes. Call us at (207) 571-8034 to get you started.
Want to know more about refinancing? Give us a call at (207) 571-8034.