When Should You Refinance?


If you’re planning to sell your home within the next 3 years, the answer is no. Refinancing typically carries closing costs amounting to 3% to 6% of your loan amount, so you need to be planning to stick around long enough to reap the benefit.

Although 3 years is typical, how long depends upon the interest rate you’re paying now and the interest rate you could get today, so take the time to do the math before making a decision.

Otherwise, here are 4 good reasons why you should sit down with us at Homewood Mortgage and discuss your alternatives.

The first and most obvious reason is if you’re paying too much interest!

Conventional wisdom says that if you’re paying 1% or more above the rate you could get today, then it’s time to consider refinancing.

According to Core Logic, more than 1/3 of homeowners are paying at least 4.5% – and some of that number are likely paying more than 5 or 6%. Refinancing would save them thousands of dollars.

What if you don’t want to increase the time left on your mortgage?

Some homeowners hesitate to refinance because they’ve paid their mortgage down to 10 or 15 years and don’t want to start over. The good news is, taking out a 15 year loan will get you an even lower interest rate – and if you keep making the payments you’re making now, you’ll have that loan paid off even sooner than your original plan.

Next: You’re paying mortgage insurance.

Mortgage insurance adds a hefty fee to your payment each month, while giving you nothing in return. So if you now have at least 20% equity in your home, refinance into a conventional loan and get rid of that extra expense.

With home values climbing steadily, you could have more equity than you realize, so check into it.

Remember: You need to qualify for a conventional loan, since ALL FHA loans now carry mortgage insurance, regardless of your down payment.

Third, you need to take some cash out of your home equity.

If you’ve got some high interest credit card debt to pay off; if you need to invest in some repairs or upgrades to your home; or if you’re carrying a higher interest second mortgage that you could retire, a cash-out refinance could be a wise move.

Just remember – refinancing to take out cash for a car, a boat, or a vacation is a very, very poor idea.

Four: You’d like to shorten the life of your loan.

Yes, you could do this by simply making a larger payment each month, but why not take advantage of the low interest rates available for 15- year mortgage loans – so that more of those dollars go to reducing the principal each month?

To refinance or not to refinance should depend on just two things:

  • Whether you plan to stay in your house for the foreseeable future.
  • Whether the numbers make good sense.

We’ll be happy to discuss your situation with you. Then we can get you pre-approved for a loan and tell you what interest rate you’d be offered.

After that, we’ll help with the calculations so you can see the total costs and the total savings you’d see with a 15-year loan or a 30-year loan.

We’re the Mike Clover Group at Homewood Mortgage – and we’d love to help you save money!

Just give us a call at 1.800.223.7409.

Mike Clover


Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

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