Weighing the Options of Refinancing
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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least 2 points under your present one? Maybe that was good advice a number of years ago, but since refinance costs have been falling recently, it could be time to look into it. A refinance is often worth its cost many times over, factoring in the advantages that come, along with a reduced interest rate.
Benefits
When you refinance, you might have the ability to reduce the interest rate and mortgage payment amount, perhaps by a lot. You also could be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You could have the option to refinance into a shorter-term mortgage program, enabling you to build up your home equity quicker.
Fees and Expenses
All these benefits do come with some expense, though. You will have the same types of fees as with your present home loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can help you get a better interest rate. The amount you'll save over the life of the loan may be substantial if you have paid up front about three percent of the new loan balance. We recommend that you talk to a tax professional before acting on advice that these paid points can be deducted on your federal income taxes.
An additional cost that a borrower might consider is that a lower rate of interest will lower the interest amount you will deduct on your taxes. We can help you do the math! Call us at (207) 571-8034.
In the end, for most people the total of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at (207) 571-8034 to get started.
Want to know more about refinancing? Call us: (207) 571-8034.