When is Refinancing Worth it?
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Shopping for a mortgage loan? We'll be glad to talk about our mortgage offerings! Call us at (207) 571-8034. Want to get started? Apply Here.
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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate will be at least two points below your existing one? Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has a number of advantages that often make it worth the up-front expenditure a few times over.
Advantages
You might be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced loan. You also might be given the option of pulling out some of the equity in your home by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you might also get the chance to build up home equity faster by switching to a shorter-term mortgage.
Fees and Expenses
As you probably expect, you'll have to pay for your the refinance process. You will pay the same sort of fees as with your existing mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You might offer to pay discount points (prepaid interest) to attain a more favorable rate of interest. If 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. You may be told that these points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please consult with your tax professional before depending on this.
An additional cost that a borrower may take into account is that a lower interest rate will lower the interest amount you'll deduct on your federal income taxes. Call us at (207) 571-8034 to help you do the math.
Ultimately, for most the total of up-front costs to refinance will be made up soon in monthly savings. We'll work with you to figure out which program is best for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing might effect your taxes. Call us at (207) 571-8034 to get started.
Curious about refinancing your home? Give us a call: (207) 571-8034.