Houston Mortgage Refinancing

Before refinancing there are certain issues you need to consider which may affect your decision to opt for a Houston mortgage refinancing solution. First, you need to make sure you have a good reason to refinance. For example, refinancing to pay off or consolidate higher interest loans could be a good idea but refinancing to take an expensive vacation somewhere may not be such a good idea.

1. How much will a Houston refinance cost?

Most people don’t stop to actually work out how much Houston mortgage refinancing will cost them. They just see a lower interest rate than they’re currently paying and presume they will be saving money in the long run. However, the closing costs alone can take two to three years to amortize. There may be other costs involved as well, such as pre-payment penalties on your initial mortgage.

2. What is the real annual cost of your new mortgage?

Mortgages have more costs than just interest charges, including commissions and fees. The total cost of a mortgage is known as an effective annual percentage rate.

You need to compare the effective APR of your current mortgage to other offers because sometimes lenders seem to offer a better interest rate but the overall effective APR is either the same or even higher.

3. Do you have enough equity?

To qualify for a decent Houston mortgage refinancing offer you need a minimum 10% equity, but 20% is preferred. Without 10% equity, many lenders won’t even talk to you, but if you have 20% equity, you may qualify for better rates.

Besides having sufficient equity in your property, you will also need a decent credit score, as a mediocre one will get you higher rates so refinancing could end up increasing your monthly payments rather than reducing them.

Lenders will also verify your employment situation, your income and your assets, as the subprime mortgage debacle has led to lenders being reticent to give credit, especially without verifying this information. This is their way of checking that you’re actually able to afford the repayments on the amount you’re borrowing.

4. Should you reset the duration of the loan?

When signing a Houston refinance contract you will probably find that you have reset the mortgage to 30 years. If you have only been paying the old mortgage for one or two years, then this won’t be a problem.

However, if you have been paying off the mortgage for 15 years prior to the refinance, you may find that the term of the mortgage has reset and been extended out to 30 years again.

It may be better to choose a shorter term for the loan as you will build up equity faster and once your mortgage is paid off, your home can be your safety net in case anything happens. Once you are the outright owner of your house, you will be able to take out a credit line on your home if you need it.

Currently, the mortgage market is changing at lightning speed as it tries to adapt to completely different market conditions. For this reason, it is a good idea to do a lot of research before choosing the best Houston mortgage refinancing institution. Sometimes it’s better to stick to the lender you know because you have a relationship with them. If anything happens, they will likely be slightly more lenient than a lender who knows nothing of you.

The most important factor, though, is that your Houston mortgage refinancing project doesn’t end up costing you more than you are saving. Make sure to check all the fine print, especially the early closing penalties on your initial mortgage. If the savings are still substantial then get ready to do some running around because it’s just like applying for a new mortgage.