Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that says you should only refinance if your new interest rate is at least two points under your current one? Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it may be time to take a serious look. Refinancing your loan has various benefits that often make it worth the up-front expenditure several times over.

Advantages

When you refinance, you may be able to reduce the interest rate and mortgage payment , perhaps significantly. You also might have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build your home equity faster by changing to a shorter-term mortgage.

The Cost

All of these advantages do cost something, though. With your refinance, you are paying for basically the same things you were charged for during your current mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Do the Math

Paying points can result in a better interest rate. When you pay (on average) 3% of the loan amount at the start, your savings for the life of the new mortgage loan can be great. We recommend that you consult with a tax professional before acting on advice that these points paid may be deducted on your federal income taxes.

Another thing about taxes is that if you lower your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that borrowers take into consideration. Call us at (207) 571-8034 to help you do the math.

Most people find that the monthly savings quickly outweigh the initial cost of a refinance. We can help you explore your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your cash on hand. Call us at (207) 571-8034 to get you started.

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