Weighing the Options of Refinancing
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It has been said that only in the case your new interest will be at least 2 points lower, should you refinance your loan. Maybe that was sound advice a number of years ago, but since refinance costs have been falling recently, it could be a good time to look into it. Refinancing your mortgage loan has various benefits that often make it worth the initial cost a few times over.
Benefits
You might be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced mortgage. You might also have the ability to "cash out" a portion of the built-up equity in your residence, which you may use to take care of higher interest debt, make home improvements, or finance a vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build your home equity faster.
The Cost
Of course, you will have some fees and expenses during your the refinance process. You will have to pay the same types of fees as you did with your existing mortgage. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might need to pay discount points (prepaid interest) to get a more favorable interest rate. Your savings on the life of the mortgage might be substantial if you have paid up front about 3% of the new loan balance. We recommend that you consult with a tax professional before acting on advice that the paid points may be deducted on your federal income taxes.
Speaking of taxes, once your interest rate is reduced, it follows that you will also be lowering the paid interest amount that you can deduct from your federal income taxes. This is one more cost that borrowers take into consideration. Call us at (207) 571-8034 to help you do the math.
In the end, for most people the total of initial costs to refinance will be made up soon in savings each month. We'll help you find out what mortgage loan program is best for you, looking at your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing could have on your taxes. Call us at (207) 571-8034 to get you started.
Curious about refinancing your home? Give us a call: (207) 571-8034.