Should I Refinance My Texas Home in 2022?
Mortgage rates hit record lows 14 times in 2020. While they have since increased a bit, they still remain in a historically low range.
For this reason, lots of individuals have been considering buying their first home during this time. If you are already happily living in your Texas home, though, that doesn’t mean you can’t take advantage of these appealing interest rates.
Many homeowners across the country have been weighing the pros and cons of refinancing to save money on interest over the life of the loan.
Should you refinance your home in Texas? Let’s take a look at everything you need to know.
What Is Refinancing?
Refinancing is when you get a new mortgage for your home by changing the existing terms of the mortgage you already have. Perhaps you are considering refinancing because you want to reduce your monthly mortgage payments, switch mortgage companies, take advantage of lower interest rates, or use money from the refinance to go towards a big purchase.
One misconception about refinancing is that people think they will end up with two mortgages. This is not the case. Technically, your first loan is paid off through the process of refinancing and then a second mortgage takes its place.
How Does Refinancing A House In Texas Work?
Refinancing taxes home is similar to when you applied for your original mortgage. You will need to shop around for a long and apply for one. You can either use a broker to see if you can qualify for refinancing or you can contact a lender directly.
You will need some paperwork in order to prove that you will qualify. Different lenders will look for different things, but in general, there are some shared documents and information you will want to dig up.
For one, you will need to prove that you have maintained and paid the original mortgage for at least one full year. Otherwise, they won’t consider refinancing.
Secondly, you also need to show that you have at least 10% or 20% equity in the property.
Third, lenders will want to know that you have a regular income. They will also look at your debt to income ratio.
Lastly, many lenders will ask for your credit score. If your credit score is low, you might end up with higher interest rates than you would like.
When It Makes Sense to Refinance Your Mortgage
Refinancing Texas homes makes sense when you have the opportunity to make a mortgage better with a new interest rate.
You will need to run some numbers in order to see if this is worth doing in your circumstance. Basically, you will want to figure out whether you will be living in Texas in your home for long enough to benefit from the savings a refinance will offer.
It’s also important to factor in the closing costs that come along with refinancing.
Situations when it can make sense to refinance include if you have an adjustable-rate mortgage, if your interest rate is high, or if your second mortgage is more than half of your income.
How Much Does It Cost to Refinance?
When you are considering refinancing your home in Dallas, you’ll want to understand the costs associated with refinancing. How much it costs to refinance homes for families has to do with your home location, the lender, and the amount you borrow.
Typically, closing costs for a refinance can range between 3 and 6% of the total amount of the loan. For example, if your loan was $200,000, you might end up paying $6000 or more in fees.
These costs do not usually include mortgage insurance, property taxes, or homeowners insurance. This is because you are simply revising your original mortgage, not completely starting the home purchasing process over from scratch.
Should You Refinance Your Texas Home?
Considering the low-interest rates available currently, it might make sense for a lot of Texas families to refinance their homes this season. However, you will want to look at your particular circumstance to make sure that it is the best financial decision for you.
Whether you want to reduce your mortgage term blank or lock in a lower rate of interest at a fixed rate, you can save money over time through refinancing. In many circumstances, the closing costs of refinancing are less than the overall savings you will accrue over time. When you save money on your mortgage, you can put that money towards other important costs, such as saving for retirement or paying down debt.
It can be a good idea to refinance to help you take control of your monthly bills and pay less in interest over the life of the loan. This means that you can have a lower monthly payment and you might even be able to pay your mortgage off sooner if you choose to do so.
However, be careful about choosing to refinance your mortgage in order to make large purchases that you otherwise couldn’t afford. It can put your home at risk if you wipe out your home equity in order to buy new stuff, remodel your home, or make other big purchases.
Refinancing Texas Homes: Is It Time For Your to Refinance?
As you can see, now might be the ideal time for you to refinance your Texas home. With historically low interest rates, refinancing could make a huge difference in your monthly budget and allow you the space to pay off your mortgage faster if you choose to do so.
Is it time for you for your Texas home refinance? If so, get started with our loan application today!