Mortgage Refinance



Many people often assume that the only reason to refinance their mortgage is to reduce monthly mortgage payments. Of course this is a popular reason for refinancing, however there are many other reasons why refinancing might make sense. There are a number of factors to take into account when determining if refinancing is going to be beneficial. Even if you are able reduce your monthly payment now, a refinance could end up costing you money in the long run. At Austin Mortgage Associates, we want to help you take the guess work out of refinancing so that you know you have made the best choice.

Common reasons for refinancing:

  • Obtain a better interest rate to create a lower payment or reduced term
  • Reduce your monthly payment in exchange for a longer term
  • Consolidate debt into a single loan
  • Switch from a variable-rate to a fixed-rate loan for stability
  • Obtain cash through the equity in your home

Refinancing can be beneficial in a variety of situations. An old rule of thumb is that if you can reduce your current interest rate at least 1% through refinancing, it is worth it to do so. This is of course a rule of thumb and it will depend on each individual’s unique situation. Let’s take a look at some of the other factors you will want to consider.

First, think about how long you are going to live in your current home after refinancing. Ideally, if you decide to refinance, you should plan to stay in your home for at least more few years. Closing costs are paid when refinancing, just the same as they were paid when you purchased your home. Those closing costs can be quite a significant amount of money. As an example, if closing costs are $5,000 and you save $200 a month by refinancing, you will need to stay in your home a little over 2 years to recover those costs. If you only save $100 per month, it will take at least 4 years to recover the same $5,000 closing costs. If you have no plans to relocate any time soon, refinancing can be very beneficial in the long run.

Another thing to consider is how long you have left on your current mortgage. If you have 20 years left on a 30-year mortgage, refinancing into another 30-year mortgage is going to extend the amount of time until you own your home outright. For many homeowners, not having a mortgage payment after retirement can be very important.

The Federal Housing Administration (FHA) and Department of Veterans’ Affairs (VA) both offer streamline refinancing programs for homeowners who currently have an FHA loan or VA loan. Streamline refinance programs are not only quick and easy, they are also only available if the resulting refinance will save the borrower at least 5% monthly. This helps to eliminate the uncertainty of a refinance.

Individuals who have accumulated equity in their home are able to take advantage of cash-out refinance loans to acquire cash for home repairs and other various needs. Cash-out refinances are different than home equity loans because they are a true refinancing of an existing loan. Home equity loans on the other hand are a separate loan on top of an existing mortgage.

Austin Mortgage Associates specialize in mortgage refinancing throughout Round Rock, Cedar Park, Georgetown, Austin, and all of Texas. To see if refinancing is the right choice for you, contact us today or use our Refinance Advisor tool to get started!