Refinancing

Three reasons people refinance

• Lower the payment by moving to a lower rate or removing mortgage insurance.
• Shorten the term from 30 to 15 or 20 years to pay less interest overall.
• Take cash out of your equity for renovations, debt payoff or a business, usually up to 80% of the home's value on conventional loans.

The number that decides it: break-even

Closing costs on a refinance usually run a few thousand dollars. Divide them by the monthly savings and you get the months it takes to come out ahead. If you expect to sell or refinance again before then, the refinance costs you money. Our refinance calculator does the math.

Cash-out and taxes

Interest on cash-out money is deductible only in limited cases, generally when the funds buy, build or substantially improve the home that secures the loan, and only if you itemize. If the cash is for a business, the tracing rules are different. As CPAs we can tell you which applies before you decide.

Texas home equity rules

Texas cash-out loans on a homestead follow Section 50(a)(6) of the Texas Constitution: an 80% loan-to-value cap, a 12-day waiting period after you receive the required notice, and closing only at a lender's or attorney's office or a title company. We plan the timeline around these rules.