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- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
Rule Of Thumb For Refinancing Mortgage
When mortgage interest rates are going up and especially when they are going down, a lot of people begin to wonder, “when is it going to be the right time for refinancing?”.
In today’s post, we will learn the rule of thumb for refinancing mortgages in Texas and some factors that you may want to consider before refinancing your home mortgage.
Cash-out Refinance Scenario
There are plenty of scenarios, and you may want to talk to a professional loan officer to figure out if the benefits of the loan outweigh the costs in your case.
In some cases, it is straight and simple. You might need to refinance because you want to lower your monthly mortgage payments so you want to extend the tenure to 30 years.
You might need to pull out some cash from your equity to pay off some of your high-interest debts.
In these examples, you won’t really think about the rule of thumb for refinancing in Texas because you have a predominant reason for refinancing your mortgage.
Rate And Term Refinance Scenario
When you look at the market interest rates, especially when they are super low, you may want to analyze it and see if it makes sense to refinance your mortgage.
After analyzing let us say you see that you save $150 every month when you refinance your mortgage.
The first thing that you need to be sure of is to know how long are you planning to stay in the house. If it is less than 3 years you may want to avoid doing the refinance.
Let us say that it is going to cost you around $5,000 to get the refinance done and you are planning to stay in the house for at least three years.
If you are saving $150 every month then for three years you will save $5,400. Which means you have recouped the closing cost in three years.
In this scenario, it would make sense to refinance.
Three Years Rule of Thumb For refinancing Mortgage In Texas
So, the rule of thumb for refinancing mortgages in Texas is that you should outweigh the cost of refinancing in the first thirty-six months.
If you are able to do so only then it makes sense to refinance your home mortgage. So when you are talking to a mortgage professional there are three things that you need to ask.
You may want to know – what is the cost of the refinance or the total closing cost?
What are the benefits that you are getting through the refinance or how much money you are saving per month? and are you able to recoup the cost in those first thirty-six months after refinancing?.
As much as people might think that they are going to stay with a loan for ten or fifteen years, the stats say that an individual either refinances or sells the house every three to five years.
So, the three-year benefit test is a really good option to decide whether or not this refinance makes sense for you.
Conclusion
It is important to know how long are you planning to stay in your current home because if you are planning to move in the next six to twelve months refinancing could not be an ideal option for you.
The break-even point of a refinance deals with the relationship between closing costs and monthly savings.
And if you are not staying in the house long after the break-even point it would not make sense to refinance. There are still many factors that are considered when it comes to refinancing your home mortgage.
We would suggest you speak to a licensed loan officer to know exactly how much you can save and if refinancing is something that you want to do at this time.
