When is Refinancing Worth it?

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It has been said that only in the case your new interest is at least 2 points lower, should you refinance your mortgage. Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it may be time to take a serious look. Refinancing your mortgage has some advantages that often make it worth the up-front expenditure many times over.

Benefits

You might be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced loan. You may also have the ability to "cash out" some of the built-up equity in your home, that you will be able use to consolidate debt, improve your home, or plan a vacation. With reduced interest rates, you might also be able to build up home equity faster by switching to a shorter-term mortgage loan.

The Cost

All these benefits do cost something, though. You'll have to pay the same types of fees as with your current home loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might look into paying points to reduce your interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the refinanced loan can be significant. You may hear that these points may be deducted on your income taxes, but since tax regulations are ever-changing, please consult a tax professional before considering this in your calculations.

One more expense that borrowers may consider is that a lower rate of interest will lower the interest amount you'll be able to deduct on your federal income taxes. We can help you do the math! Call us at (207) 571-8034.

Most people find that the savings each month quickly balance out the up-front cost of a refinance. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (207) 571-8034 to get started.

Curious about refinancing your home? Give us a call at (207) 571-8034.