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When can you Refinance a Home Loan in Texas?
This is a very common question asked by many people who already have a mortgage on their properties. It could be a confusing situation when it comes to refinancing your house.
When mortgage interest rates are going up and especially when they are going down, a lot of people have begun to wonder, When is the best time to refinance a home loan in Texas?
At some point, every homeowner wonders when does it make sense to refinance a home loan. There are a few factors that you may want to consider before you decide to refinance your home mortgage.
We all are aware of how refinancing works which we discussed in one of our previous blogs “What Does It Mean To Refinance”.
We also mentioned some common reasons why an individual would refinance a home loan. Today we will see ‘When Is The Best Time To Refinance A Home Loan In Texas’.
Most homeowners think that it is a good decision to refinance a home loan when you are getting a lower interest rate.
Yes, usually they are right. But the thumb rule says if the interest rate you are getting on your new refinance should be at least 0.75% to 1% lower than the previous mortgage interest rate.
For example, if your previous interest rate is at 5% it would make sense to refinance a home loan if you are getting an interest rate of at least 4.25% or lower.
A second most important factor to keep in mind to refinance a home loan in Texas is how much time would it take for you to recoup the closing costs which are charged by the lender to get the refinance done, and if you are planning to stay in the house long enough.
If you are planning to move before you recoup the closing costs we would suggest not to refinance at this time. Make sure you know all the fees included in the closing costs.
It is always suggested to pay the closing costs upfront because if you include that in your loan amount you might end up paying interest on the closing cost as well.
The third important factor to consider would be when you decide to pull money from your equity. We have already established how important your home equity is in “Understanding Home Equity”.
When you decide to pull money out from your home equity is always suggested to invest in an asset that would give you more return for the amount of money you took out.
One more thing you might want to consider especially when interest rates are really low is to lower your loan tenure.
When the interest rates are low and you are at a 30 years mortgage and if you have paid off a few years, it would be a good decision to refinance if the payments of a 20 years mortgage are either the same or lower than your current 30 year one.
Conclusion
Considering all the above factors, ensure when you can save money n your existing mortgage that is the time when you might want to start thinking about refinancing a home loan in Texas.
Have a conversation with your trusted loan officer whenever you think that the time is right for you.
Eventually, it all has to make sense and should be worth all the efforts that you are willing to put going through the refinance.
