Should You Refinance a Texas Mortgage?

Refinancing replaces an existing mortgage with a new loan. It may reduce the rate, change the payment, shorten or extend the term, alter mortgage insurance or provide cash from equity. Every benefit has to be measured against closing costs and the new loan's full timeline.

Calculate the break-even point

A simple break-even estimate divides eligible upfront costs by expected monthly savings. That is only a starting point: compare principal reduction, points, lender credits, mortgage insurance and the likelihood of selling or refinancing again.

Do not compare payments with different clocks

A homeowner with 22 years remaining who starts a new 30-year loan may receive a lower payment partly because repayment has been stretched across eight additional years. Compare the new loan at the same remaining term before evaluating a longer alternative.

Rate-and-term versus cash-out

• A rate-and-term refinance primarily changes rate, payment, term or loan structure.
• A cash-out refinance creates a larger first mortgage and turns equity into debt secured by the home.
• A no-closing-cost offer generally recovers costs through a higher rate, lender credit or larger balance.

The strongest refinance decision has a clear goal, a written Loan Estimate, a break-even date inside the expected holding period and enough reserves left after closing.