Home refinancing is a process wherein you replace your current mortgage with a new one, with the primary goal of saving money. You may find it complex, though, especially if you are new to the industry. Hence, asking for help from an expert to guide you through the process can be one of the most intelligent decisions you can make.
It is important to note that there is no set rule as to when you should refinance. However, factors like budget plans and goals contribute to refinancing decisions.
As a primer, we will discuss, in this post, some scenarios that signal it is the best time for a home refinance in Tyler, TX.
When refinancing can reduce your interest rate by 1% or more
Several online tools allow you to compare the refinance rates with your current ones. Most experts agree that refinancing is worth it if you can bring your interest rate down to at least one percentage point. In some instances, a half-percentage point may be beneficial also, which means a slight rate reduction can translate to a big difference in long-term costs.
When you plan to stay in the home long enough to reap the benefits
In this scenario, you have to compute your breakeven point, which is the time when you can already recoup your closing costs. For instance, if your refinance cost is USD 4000 and saves you USD 100 per month, your breakeven point will be around 40 months. If you plan to live in the house for only 40 months, then home refinancing may be worth the money.
When you need extra cash to cover other expenses
If you have a scheduled payment upcoming that would otherwise go on a credit card, consider mortgage refinancing to get the extra cash you need to cover your other expenses. The thing is, mortgage rates tend to have much lower interest rates than credit cards.