When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points lower than your existing rate? Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it could be time to take a serious look. A refinance is often worth its cost many times over, factoring in the benefits that come, along with a reduced interest rate.

Benefits from Refinancing

You might be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You could also have the option to "cash out" a portion of the built-up equity in your home, that you will be able use to take care of higher interest debt, improve your home, or finance a vacation. With reduced rates, you may also be able to build up home equity faster by changing to a shorter term mortgage.

The Cost

Of course, you will have some fees and expenses during your the refinance process. You'll pay the same types of fees as you did with your existing mortgage. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Doing the Math

You might investigate paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the life of the new loan can be great. We recommend that you consult with a tax professional before acting on rumors that these paid points can be deducted on your taxes.

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

Most people find that the monthly savings outweigh the up-front expenses of a refinance. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (207) 571-8034 to get you started.

Want to know more about refinancing? Call us: (207) 571-8034.