By Gene Griffin, Branch Manager, NMLS #2234848 ·
A refinance usually makes sense when you'll keep the new loan longer than your break-even point: total closing costs divided by your monthly savings. Other good reasons are dropping FHA mortgage insurance, taking cash out or changing your loan term. If you're selling soon or the savings are small, waiting can be better.
There's an old rule of thumb that you should refinance when rates drop by a full point. It's a starting point, but your own numbers matter more than any rule.
Start with the break-even point
Add up the closing costs and divide by how much you'd save each month. That's how many months it takes to come out ahead. If you'll keep the loan longer than that, the refinance may be worth it.
Other good reasons
- Dropping mortgage insurance by moving from FHA to conventional once your equity allows it.
- Cash out for a renovation, to pay off higher-interest debt or to fund the next purchase. Texas has its own home equity rules, so ask about them.
- Changing the term to pay the home off faster, or to lower the payment when cash flow matters more.
When to wait
If you plan to sell soon, if the savings are small or if the new loan restarts a 30-year clock you don't want, waiting can be the better call.
We offer a free refinance analysis any time. Send us your current loan details and we'll show you every option side by side, including staying put.
This article is general information, not a loan offer or financial advice. Programs and guidelines change; talk with a licensed advisor about your situation.