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Is now a good time to refinance?

· refinance,mortgage rates
is now the right time to refinance with texas mortgage lender

Low interest rate articles are everywhere but does it make sense for your to refinance? Here are two questions to ask yourself in order to figure out if refinancing makes sense for you:

1 – Interest & Cost Benefit: What would be my interest and cost savings if I refinance into a lower interest rate?

For example, assume you could save $50 in monthly interest expenses if you paid $2,500 in closing costs to refinance. In this case, it would take you 50 months to break-even ($2,500 costs / $50 monthly savings = 50-month break-even).

When you calculate your refinancing costs, you should include all the closing costs on the new loan, but you should not include the pre-paid interest or pre-paid items that go into your new escrow account. That’s because you’ll get a refund of whatever is in your existing escrow account after you pay off the current mortgage. In some cases, the lender may allow you to pay less closing costs in exchange for a slighter higher interest rate.

When you calculate your interest and cost savings, be sure to include the mortgage insurance that you may be able to reduce or eliminate by refinancing. For example, assume your home value has increased from the time you purchased the home. The mortgage insurance may be less if the mortgage balance only represents 85% of your current home value vs. 95% of your current home value.

2 – Cash Flow Benefit: How would my overall cash flow situation change if I refinance?

Here are three examples of when it could make sense for you to refinance even if your new interest rate is not that different from your current interest rate:

  • Assume you took out a car loan or racked up some credit card balances that carry interest rates that may be higher than current mortgage rates. You may be able to benefit from a debt consolidation refinance.  In this case, be sure to compare your current blended interest rate scenario vs. the new refinance scenario.
  • Assume you recently completed some home improvements, or you’d like to make some home improvements in the near future. Trading in your current mortgage for a new one through a “cash-out refinance” may be the way to go.  If you go this route, the IRS gives you a 24-month look-back period and a 12-month look forward period to gain the coveted “acquisition indebtedness” tax deductibility status.  For more details, please see my article titled, Three Things You Should Know if You’re Pulling Cash-Out for Home Improvement.
  • Assume you have an upcoming large expense where it makes more sense to use a low-interest-rate mortgage vs. paying cash or liquidating other investments. In this case, you could use the funds from a “cash-out refinance” in order to preserve your cash and/or other investment assets.
3- Cash Out
Do your want to make some home improvements or know of another investment you could make yielding a higher rate of return compared to the interest you would pay on your mortgage? Now is a great time to look at cashing out because the rates are so good. Every situaltion is different. I would be more than happy to give you my opinion!

Please contact me for details on any of these ideas, or to evaluate your mortgage options.

Source: CMPS Institute

Stephanie Donnell
Residential Mortgage Loan Originator
NMLS: 1031976
Capstar Lending, LLC
(512) 608-7303
6836 Austin Center Blvd #110,
Austin, Texas 78731
Corporate NMLS: 214411

Capstar Lending, LLC NMLS 214411 ( 6836 Austin Center Blvd #110; Austin TX 78731 512-459-2400. Capstar Lending, LLC is an Equal Housing Lender. This is not an offer to enter into an agreement. Information, rates and fees are subject to change without prior notice. Loan approval is subject to applicant's qualification for a loan program. All products are subject to credit and property approval. Capstar Lending, LLC is not affiliated with any government agency. Intended for Texas consumers only, Texas- SML Mortgage Banker Registration. Residential Mortgage Loan Originator.

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