Weighing the Options of Refinancing

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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 two points below your existing rate? That might have been true years ago, but as refinancing has been costing less over the last few years, it is a good time to consider a new loan! Refinancing has a number of benefits that can make it worth the up-front cost a few times over.

Advantages

When you refinance, you might be able to reduce the interest rate and monthly payment , sometimes significantly. You also may be given the option of pulling out some of the equity in your property by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You could be able to refinance into a shorter-term mortgage loan, enabling you to build your equity quicker.

Fees and Expenses

Of course, you'll have to pay for your the refinance process. You will be charged the same types of expenses and fees as with your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might offer to pay points (prepaid interest) to attain a lower rate of interest. When you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the new mortgage loan can be great. You may be told that the points can be deducted on your income taxes, but since tax regulations are difficult to keep up with, we urge you to consult with a tax professional before making any decisions based on this.

Another thing about taxes is that when your interest rate is reduced, of course you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that borrowers consider. We can help you do the math! Call us at (207) 571-8034.

Most people find that the savings each month outweigh the up-front cost of refinancing. We can help you explore what your options are, considering the effect a refinance might 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 started.

Want to know more about refinancing your home? Give us a call at (207) 571-8034.