Is Refinancing Worth the Cost?
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Searching for mortgage advice? We will be glad to help! Call us at (207) 571-8034. Ready to begin? Apply Now.
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Ever hear the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points below your present rate? Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a number of advantages that will often make it worth the up-front expenditure many times over.
Advantages
You could be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with your refinanced mortgage. You might also be able to "cash out" a portion of the built-up equity in your residence, which you are able use to consolidate debts, make home improvements, or take a vacation. You could be able to refinance into a shorter-term mortgage program, giving you the ability to add to your equity quicker.
Expenses and Fees
All of these advantages do cost something, though. When you refinance, you are paying for basically the same things you paid for when you got your current mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
You might offer to pay points (prepaid interest) to get a lower rate of interest. The amount you will save over the life of the loan could be significant if you have paid up front about three percent of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.
Another thing about taxes is that if you reduce your interest rate, of course you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is another expense that some borrowers take into account. Call us at (207) 571-8034 to help you do the math.
Most people find that the savings each month quickly balance out the initial cost of refinancing. We'll work with you to figure out what mortgage program is the best fit for you, taking into account your cash on hand, how likely you are to sell your house 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.