When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate will be at least two points lower than your current one? Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it may be time to look into it. Refinancing your mortgage loan has a variety of benefits that will often make it worth the up-front expenditure many times over.

Advantages

You may be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. Additionally, you might have the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also get the chance to build up home equity faster by changing to a shorter-term mortgage loan.

Fees and Expenses

As you probably know, you'll have to pay for the process of refinancing. With your refinance, you are paying for a lot of the same things you were charged for at the time you got your original mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Doing the Math

You might consider paying points to receive a lower interest rate. The amount you'll save over the life of the mortgage loan may be significant if you've paid up front about three percent of the new loan total. Please talk to 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 once you lower your interest rate, it follows that you will also be reducing the interest amount that you can deduct on your taxes. This is another expense that borrowers take into consideration. We can help you do the math! Call us at (207) 571-8034.

All things considered, for most people the amount of up-front costs to refinance will be paid back soon in monthly savings. We can help you find out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (207) 571-8034 to get you started.

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