Are you looking to refinance your home in Fort Worth, TX? With so much on the line, you don't want to miss out on a great opportunity. That's why you need to understand all your options!
There are several options to choose from, and it can be confusing trying to decide which one is best for you. That's why we are here to go over the different types of refinancing options available in Texas and the pros and cons of each one.
We will also talk about some of the mistakes people often make when refinancing their mortgages and how to avoid them. So if you're considering options for refinancing a home in Fort Worth, TX, read on for some very useful information!
How often should you refinance your mortgage?
In Texas, you may refinance your mortgage as many times as you like. However, the Texas Constitution does require you to wait at least one year between cash-out refis. For most people, this is not an issue since it's unlikely you'd choose or qualify to refinance more frequently than that.
When should you consider mortgage refinancing?
You should consider refinancing if interest rates have dropped since you originally took out your mortgage or if you've improved your credit score and can qualify for a lower interest rate.
If you refinance to take advantage of a lower rate but do not withdraw cash, you may be able to pay off your home loan quicker than expected.
You may also want to refinance if you need to consolidate debt or free up some cash. For example, some people with home equity use cash-out refinances as home improvement loans.
Others might consider cash-out refinancing to help with debt consolidation. A fixed-rate mortgage will likely have a much lower interest rate than a personal loan would, so you can use the cash you pull out to pay down higher-interest debts.
What should you expect when refinancing a mortgage?
When refinancing your mortgage, you can expect the process to take anywhere from four to six weeks. You will be required to provide documentation such as pay stubs and tax returns during this time.
Your mortgage lender will also order a home appraisal to determine your property's value. The higher the value and the more you have paid off your original loan, the more cash you will be able to withdraw.
Once all of this is completed, you will be given a loan estimate which will outline the terms of your new mortgage. You will likely incur new closing costs and fees, which can typically be rolled into the new mortgage.
Options for refinancing a home in Fort Worth, TX
There are several options available when refinancing a home in Fort Worth, TX. These include:
With this type of mortgage refinancing, you can take out cash from the equity in your home. This can be used for things such as home improvements or debt consolidation.
-Texas homestead refinance
A Texas 50(a)(6) loan (home equity/ cash-out refinance) is a loan originated in accordance with and secured by a lien permitted under the provisions of Article XVI, Section 50(a)(6) of the Texas Constitution, which allows a borrower to take equity out of a homestead property under certain conditions.
This type of cash-out refinance is available to Texas homeowners who have already taken out a homestead mortgage. It allows you to lower your interest rate and monthly payments or withdraw cash.
There are property restrictions on this type of mortgage refinancing. Specifically, they only apply to single-unit primary residences. This can include condos, attached or detached home, and multi0width manufactured homes. Single-width manufactured homes are not permitted.
A traditional refinance is a good option if you're looking to lower your interest rate or monthly payments. So if you simply want to make your monthly payments more affordable and your home value is steady or has increased in the recent market upswing, you may choose to refinance your mortgage.
Keep in mind that if you are interested in lowering your interest rate, you don't want to be fooled by slick advertising. For example, an adjustable-rate mortgage may look like a good idea, but your interest rate could balloon later.
If you couldn't get a better rate by refinancing to a fixed-rate mortgage, you might want to put off refinancing altogether. Some predatory mortgage companies will try to convince you to refinance because they earn income off fees and closing costs. That's why it's so important to choose a reputable mortgage lender.
A reverse mortgage is a type of loan that allows you to borrow against the equity in your home. This can be a good option for seniors who need extra money for things such as medical bills or home repairs.
Homeowners are only eligible for reverse mortgages if they are age 62 or older. Many use the money to pay off their mortgage, supplement their income, or pay for healthcare expenses. In that way, it's similar to a cash-out refinance. However, the repayment structure is very different.
This type of mortgage refinancing allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. There are three types of reverse mortgages to choose from.
Avoid these refinance mistakes
When refinancing your home, it's important to avoid making some common mistakes. These include:
-Not shopping around for the best deal
Be sure to compare rates and terms from multiple lenders before choosing one.
-Failing to compare apples to apples
Make sure you're comparing loans with similar terms and conditions. Otherwise, you may not be getting the best deal possible.
-Not understanding the fees
Be sure to ask about all of the fees associated with mortgage refinancing, such as appraisal and origination fees. Ask how fees need to be paid, as well.
-Not having enough equity
You will need at least 20% equity in your home to qualify for most refinance options.
How different mortgage loans and types impact refinancing
The type of mortgage you have will impact what options are available to you when refinancing. For example, if you have an adjustable-rate mortgage (ARM), you may be able to lower your interest rate by refinancing into a fixed-rate loan.
Or, if you have a government-backed loan such as a VA or FHA loan, you may get a streamlined refinance with fewer requirements.
Finding mortgage lenders
Not all lenders are alike. When looking for a lender to refinance your home, it's important to shop around and compare rates and terms.
You can start by checking with your current lender, as they may offer special programs for existing customers. Alternatively, if you're unhappy with your current lender, refinancing is a perfect time to switch to a new company!
You can also check with online lenders or local banks and credit unions. Be sure to compare rates, fees, and terms before choosing a lender.
It also never hurts to ask friends and family members for recommendations. Remember, your lender will be working closely with you to secure great rates and close quickly. Make sure to choose an experienced local lender who will work hard to give you their best.
Throughout this process, if you have any questions, be sure to ask your lender or a housing counselor. They will be able to help you understand the process and find the best option for your situation.
Get started today
When you bought your home, you likely took out a mortgage loan to help make the purchase possible. Over time, your financial situation may have changed, and you may now find yourself in a position where refinancing could save you money each month.
There are many options for refinancing a home in Fort Worth, TX, and surrounding communities. We understand it can be overwhelming to know which one is right for you. The team at Texas United Mortgage is here to help you get started on a Texas refinance and make the best decision for you and your home!