Many people take various loan programs to make term payment terms easier. One popular choice is refinancing, a type of loan where a new loan is taken out against an existing one. Refinancing may be viewed as an opportunity to get a lower mortgage rate or shorten your loan term to make your monthly payments more manageable. However, it’s also a decision that can carry many additional costs and requirements.

If you’re considering refinancing your home, you need to take a good look at your budget to see if you can make the new payments. You should also think about how the interest rate or term might affect the overall value of your home, known as the “equity.”

Here, we have gathered some of the most important things you should know before refinancing.

#1 – The Reason Why You’re Refinancing

You shouldn’t seek a refinance solely based on lowering your monthly payments. Indeed, saving a few hundred dollars is great, but it’s not worth it if it messes with your savings goals.

A good reason to refinance your mortgage will be to see a change in your business or situation that can make paying off your mortgage sooner a realistic possibility. For example, if you lose your job and start receiving unemployment benefits, you may be able to use that money to pay off your mortgage instead of living paycheck to paycheck.

#2 – Consider Your Closing Costs

Closing costs are an essential consideration when you’re refinancing your home. They can come as a surprise to homeowners who don’t know what to expect before they close on their mortgage. However, you can take steps to mitigate their impact before you even sign on the dotted line.

Typically, closing costs will come out of your pocket before the new money from your refinance loan is added to your mortgage. You can work with your lender to avoid paying a hefty sum upfront by requesting a staggered closing date. This is a good option if you have the funds on hand to pay for some of the closing costs in advance.

#3 – Consider Your PMI

One of the main differences between a refinance loan and a traditional mortgage is private mortgage insurance or PMI. In a refinance, PMI can be rolled into your loan. If it is, you’ll be required to pay a lower mortgage rate, but you’ll pay PMI for as long as you keep the mortgage.

The main downside to rolling PMI into your mortgage is that you could be paying for coverage on a loan for which you might never be able to make a full claim. For example, if you choose to refinance into a shorter loan term, you may need to buy out the remaining PMI after you’ve paid off your loan. For this reason, it may be better to go with a mortgage that doesn’t require PMI.

#4 – Know Your Credit Score

Your credit score is a vital piece of information that will most likely be used to determine whether you’re eligible to refinance your mortgage. If you want to get the best interest rate and loan terms, your credit score will significantly affect how much money you’re eligible to borrow.

#5 – Evaluate Your Home’s Equity

When you’re thinking about refinancing your mortgage, it’s essential to look at the equity you have in your home. This is the value of your home after you’ve subtracted what you owe on it, also known as your “loan balance.”

In other words, equity is the amount you own outright after you’ve taken out a mortgage on your home. It’s an essential consideration because your lender will typically require you to put some money down when you refinance. This money is put toward the amount you owe on the new mortgage.

#6 – There’s No Such Thing as a ”No Cost” Refinancing Option

You may have heard or read that you can refinance your home with no fees or costs, but it’s not true. There are always costs and expenses associated with refinancing a mortgage. However, the fees and costs may be less than those you’d face if you took out a new mortgage on your home.

#7 – There Are Drawbacks to Refinancing

When you refinance with a new mortgage, your current mortgage may be paid off in full, or the lender may roll it into your new loan. You may also be paying off your existing mortgage with funds you could have been using to pay down your credit card debt or other personal loans. For that reason, it’s crucial to think about whether you will be able to maintain at least the same level of payments for your other debts.


Refinancing a mortgage is a big decision and should be approached with caution. Make sure to work with a mortgage professional who can discuss your options with you and help you determine if refinancing is the right decision for you.

If you’re looking to refinance in Dallas, Texas, Total Lending Concepts has got you covered! We offer various refinancing options such as conventional rates, conventional cash-out, and streamlining. Contact us today to learn more!