When is Refinancing Worth it?

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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 2 points under your present rate? That could have been sound advice a while back, but since refinancing has been costing less in recent years, it's never the wrong time to explore the options of a new mortgage! A refinance may be worth its cost many times over, considering the benefits that may come, along with a lower interest rate.

Advantages

You could be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced loan. You also might be given the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you might also get the chance to build your home equity faster by moving to a shorter term mortgage.

Fees and Expenses

As you probably know, you will have to pay for your process of refinancing. You will have the same kinds of expenses and fees as with your present mortgage. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Do the Math

You could need to pay points (prepaid interest) to attain a more favorable rate of interest. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the new loan can be significant. We recommend that you talk to a tax professional before acting on hear-say that any points paid may be deducted on your federal income taxes.

Another expense that borrowers might take into account is that a reduced 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.

All things considered, for most borrowers the amount of up-front costs to refinance are paid back very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (207) 571-8034 to get you started.

Curious about refinancing? Call us at (207) 571-8034.