Weighing the Options of Refinancing

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Have you ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least two points lower than your existing one? Perhaps that was good advice several years ago, but since refinance costs have been falling recently, it may be a good time to look into it. Refinancing has a number of benefits that often make it worth the up-front cost a few times over.

Benefits

You could be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with your refinanced mortgage. You may also be able to "cash out" some of the built-up equity in your residence, that you may use to take care of higher interest debt, add on to your home, or finance a vacation. You could be able to refinance to a shorter-term mortgage loan, giving you the ability to build your home equity faster.

The Cost

Of course, you will have to pay for your process of refinancing. When you refinance, you are paying for basically the same things you paid for during your current mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying discount points can result in a better interest rate. Your savings over the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on rumors that the points paid may be deducted on your taxes.

Speaking of taxes, when your interest rate is reduced, naturally you will also be lowering the interest amount that you can deduct from your taxes. This is one more expense that some borrowers take into consideration. Call us at (207) 571-8034 to help you do the math.

Ultimately, for most the amount of initial costs to refinance will be paid back soon in savings each month. We'll help you determine what mortgage program is right for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing could effect your taxes. Call us at (207) 571-8034 to get started.

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