When is Refinancing Worth it?
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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points lower than your existing one? Perhaps that was sound advice several years ago, but since refinance costs have been getting lower, it could be a good time to look into it. A refinance may be worth its cost many times over, because of the advantages that it brings, as well as a lower interest rate.
Advantages of Refinancing
You might be able to bring down your interest rate (sometimes significantly) and have smaller monthly payments with a refinanced loan. Additionally, you may have the option of pulling out some of the equity in your home by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build your home equity quicker.
Fees and Expenses
All of these advantages do come with some expense, though. You will pay the same sort of fees as you did with your current home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might look into paying points to get a reduced interest rate. The money you will save over the life of the mortgage may be significant if you've paid up front about three percent of the new loan balance. Please consult with a tax professional before acting on advice that the points paid can be deducted on your federal income taxes.
Another thing about taxes is that if you lower your interest rate, it follows that you'll also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at (207) 571-8034.
In the end, for most borrowers the amount of up-front costs to refinance will be paid back very quickly in savings each month. We can help you figure out your options, 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? Give us a call: (207) 571-8034.