Weighing the Options of Refinancing
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Some have said that only if your new interest will be at least two points below your current rate, should you refinance your loan. That may have been valid a while back, but with the fact that refinancing has been costing less over the last few years, it is a good time to think about a new loan! A refinanced mortgage may be worth its cost many times over, because of the benefits that it brings, as well as a lower interest rate.
Benefits from Refinancing
When you refinance, you may be able to reduce your interest rate and monthly mortgage payment amount, sometimes significantly. You may also have the ability to "cash out" a portion of your home equity, that you will be able use to take care of higher interest debt, add on to your home, or take a vacation. With lower interest rates, you might also get the chance to build up home equity faster by switching to a shorter-term loan.
Fees and Expenses
As you probably expect, you will have some fees and expenses during the the refinance process. You will have to pay the same sort of expenses and fees as you did with your present home loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
You could need to pay points (prepaid interest) to attain a better interest rate. The amount you'll save over the life of the mortgage loan could be substantial if you have paid up front about three percent of the new loan total. We recommend that you consult with a tax professional before acting on advice that the paid points can be deducted on your taxes.
One more cost that borrowers may consider is that a lower interest rate will lower the interest amount you'll be able to deduct on your taxes. 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 are made up soon in savings each month. We'll work with you to figure out which program is ideal for you, taking into account your cash on hand, the likelihood of selling your home in the near future, and what effect refinancing might have on your taxes. Call us at (207) 571-8034 to get you started.
Curious about refinancing? Call us at (207) 571-8034.