Texas Mortgage: Does it make sense to refinance a small home loan?

Texas Mortgage:  Does it make sense to refinance a small home loan?     

 Almost everyday I get a phone call from someone who wants to refinance a relatively small home loan.  Sometimes the loan is even under 100K.   And almost every time I suggest that the client NOT refinance.  Here’s why:

 The smaller the loan the less impact refinancing has.  For example, if you’re refinancing a $400,000 loan from 6% to 5% you are saving $250 per month.  However, if you are refinancing a $100,00 home loan you will only save $63/month.  See how $63 really doesn’t really make sense?  Especially since the “standard closing costs” are around 3K, it will take you 47 months to recover your closing costs. http://www.mylendingplace.com/

 Add points to get a “sexier” mortgage rate and the 47 months turns into 5 years. The best home loans are loans without points because banker points add to the time it takes to truly benefit from your refinance. So, when refinancing, we really need to look at the actual savings and how quickly (how many) months it will take you to recoup your closing costs.  Our mortgage/refinance closing costs are at the top of this website.  Notice we only charge a flat $500 loan fee.

 So if you’re refinancing a smaller loan—or any loan for that matter—ask yourself “how much do I need to save, per month, to justify the refinance?   Because unless your loan is above 120K, often the savings are not there.  It’s best to NOT refinance.  My advice is:  Have specific goals and then call your mortgage guy.  Because the clearer your refinance goals the better chance you’ll make a good refinance decision.

 Another way to save is to consider a cash out refinance.   Also called a Texas Cash Out Loan because the borrower is taking money out or taking cash out of their home.  I just helped a client save $300/month with this type of loan but because he pulled cash out to pay off bills he’s saving around $600/month.  As long as the client doesn’t get back into debt the best refinance is often a cash out refinance.

 Have Clear Goals |  Be Specific regarding how much you want to save per month or over the life of the note | Call Texas Mortgage!

Dallas:  972-325-2120     Austin:  512-996-8194     Houston:  713-589-2244

 If you’d like more information regarding a Texas refinance or a home equity loan please call us at 512-996-8194

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