For many homeowners in Houston, refinancing their homes can be a smart financial move. With the current low-interest rates and rising home values, refinancing can save homeowners thousands of dollars in interest over the life of their mortgage.
What is Mortgage Refinancing?
Mortgage Refinancing is the process of taking out a new mortgage to replace your current one. This can be done to lower your interest rate, shorten the term of your loan, or cash out on your home equity. There are two main types of refinancing: a traditional refinance and a cash-out refinance.
A traditional refinance involves replacing your current mortgage with a new one with a lower interest rate or better terms. This can lower your monthly payment and save you money over the life of your loan. A cash-out refinance, on the other hand, allows you to take out a new mortgage for more than you currently owe on your home. The extra funds can be used for things like home renovations, paying off high-interest debt, or investing in a new business.
Home Equity vs Home Equity Lines of Credit (HELOCs)
Home equity loans and home equity lines of credit (HELOCs) are two other options for accessing your home equity. A home equity loan is a type of loan where you borrow a lump sum of money using your home as collateral. You then repay the loan over a set period of time, usually with a fixed interest rate. A HELOC, on the other hand, is a revolving line of credit that allows you to borrow money as you need it, up to a set credit limit. You can borrow and repay funds as many times as you want during the draw period, which is typically 10 years.
One of the benefits of using a home equity loan or HELOC is that the interest may be tax-deductible. However, it's important to note that if you default on the loan, you could lose your home. Additionally, these loans often come with higher interest rates than a traditional mortgage refinance.
Benefits of Refinancing Your Home in Houston
- Lower Monthly Payments: Refinancing your home can lower your monthly mortgage payments, giving you more financial breathing room each month. This is especially helpful for homeowners who are struggling to keep up with their mortgage payments.
- Shorten Your Loan Term: Refinancing can be a good option if you're looking to pay off your mortgage faster. You can refinance to a shorter loan term, which means you'll be paying more each month, but you'll pay off your mortgage sooner.
- Lower Interest Rates: If you're currently paying a high-interest rate on your mortgage, refinancing can help you get a lower rate. This can save you thousands of dollars in interest over the life of your loan.
- Access to Equity: If you've built up equity in your home, you can access that equity through a cash-out refinance. This allows you to take out a new mortgage for more than your current mortgage balance and use the extra funds for home renovations, debt consolidation, or other expenses.
So, is refinancing right for you? Here are some things to consider:
- Your current interest rate: If you have a high-interest rate, refinancing can lower your monthly payment and save you money over the life of your loan. Even a small reduction in interest can add up to thousands of dollars in savings over time.
- Your current term: If you have a long-term mortgage, refinancing to a shorter term can save you money on interest and help you pay off your home faster.
- Your credit score: Your credit score plays a big role in determining your interest rate. If your score has improved since you took out your original mortgage, you may be able to get a lower interest rate by refinancing.
- Your home equity: If you have a significant amount of equity in your home, a cash-out refinance or home equity loan/HELOC can be a good option for accessing that equity. However, it's important to consider the long-term impact of adding more debt to your home.
- Your financial goals: Refinancing should align with your financial goals. Whether you want to save money on interest, pay off your home faster, or access your home equity, make sure that refinancing is the right choice for you.
Use our Refinance Interest Savings Calculator or the Mortgage Refinance Calculator to help determine if you should refinance.
Refinance Your Mortgage Through Texas Bay Credit Union
If you're considering refinancing, Texas Bay Credit Union offers a variety of refinancing options, including traditional mortgage refinancing, cash-out refinancing, home equity loans, and HELOCs.
Our experienced mortgage team can help you determine which option is right for you and guide you through the refinancing process from start to finish. Plus, as a credit union, we offer competitive rates and personalized service that you won't find at a big bank.
What members are saying, from TrustPilot: