Weighing the Options of Refinancing

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Some have said that only if your new interest is at least two points lower, should you refinance your mortgage. Perhaps that was sound advice several years ago, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing has a variety of benefits that will often make it worth the initial expenditure many times over.

Benefits

You might be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with a refinanced mortgage loan. You may also have the ability to "cash out" a portion of your equity, that you are able use to take care of higher interest debts, make home improvements, or take a vacation. You could be able to refinance into a shorter-term mortgage program, enabling you to add to your home equity quicker.

The Cost

All of these benefits do cost something, though. You will have to pay the same sort of expenses and fees as with your existing mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You could need to pay discount points (prepaid interest) to gain a better interest rate. The amount you'll save on the life of the loan could be significant if you've paid up front about three percent of the new loan total. Please consult with a tax professional before acting on advice that the paid points may be deducted on your taxes.

Speaking of taxes, when you reduce your interest rate, of course you will also be lowering the paid interest amount that you can deduct on your federal income taxes. This is another expense that some borrowers take into account. We can help you do the math! Call us at (207) 571-8034.

In the end, for most the total of initial costs to refinance are paid back very quickly in savings each month. We'll work with you to determine what loan program is perfect for you, considering your cash on hand, how likely you are to sell your house in the near future, and how refinancing can effect your taxes. Call us at (207) 571-8034 to get started.

Want to know more about refinancing? Call us at (207) 571-8034.