Weighing the Options of Refinancing

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Some have said that only if your new interest is at least two points below your current rate, should you refinance your mortgage. Maybe that was good advice several years ago, but since refinance costs have been getting lower, it could be a good time to look into it. A refinance is often worth its cost several times over, considering the benefits that it brings, along with a lower interest rate.

Benefits from Refinancing

You may be able to bring down your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced mortgage. Additionally, you could have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also get the chance to build your home equity faster by switching to a shorter term loan.

Fees and Expenses

All these benefits do come with some expense, though. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might think about paying points to reduce your interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the refinanced mortgage can be great. You may hear that these points can be tax deductible, but since tax regulations are ever-changing, please speak with your tax professional before making decisions based on this.

One more cost that borrowers might take into account is that a lower interest rate will lower the interest amount you'll be able to deduct on your federal income taxes. We can help you do the math! Call us at (207) 571-8034.

Ultimately, for most people the total of up-front costs to refinance will be made up soon in savings each month. We'll work with you to figure out what program is right for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and the effect refinancing will probably have on your taxes. Call us at (207) 571-8034 to get started.

Curious about refinancing your home? Call us: (207) 571-8034.