When is Refinancing Worth it?
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Looking for a mortgage loan? We'd be thrilled to discuss our many mortgage solutions! Give us a call at (207) 571-8034. Ready to get started? Apply Here.
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Ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points under your present one? That might have been sound advice a while back, but with refinancing dropping in cost over the last few years, it is never the wrong time to explore the options of a new loan! Refinancing your loan has a number of advantages that can make it worth the up-front cost several times over.
Advantages
When you refinance, you could be able to lower your interest rate and mortgage payment amount, perhaps considerably. You may also have the option to "cash out" some of the built-up equity in your home, which you will be able use to consolidate debts, improve your home, or plan a vacation. You might have the option to refinance into a shorter-term mortgage loan, enabling you to build up your equity quicker.
Expenses and Fees
All of these benefits do come with some expense, though. With your refinance, you are paying for most of the same things you paid for at the time you got your current mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might offer to pay discount points (prepaid interest) to gain a better interest rate. Your savings over the life of the loan may be significant if you have paid up front about 3% of the new loan balance. You might have heard that the points may be tax deductible, but since tax regulations are ever-changing, please speak with your tax professional before considering this in your calculations.
Another cost that a borrower might take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your federal income taxes. Call us at (207) 571-8034 to help you do the math.
Most borrowers find that the monthly savings balance out the initial cost of refinancing. We can help you explore what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at (207) 571-8034 to get started.
Curious about refinancing your home? Give us a call: (207) 571-8034.