6 Reasons to Refinance Your Home
If done correctly, taking out a refinance home loan can save you thousands of dollars in interest, and free up some cash. However, it’s a difficult decision to make. Refinancing frequently, for the sake of being able to make large purchases, can lead to an unstable financial future, and risks of high debt. Here are six reasons why refinancing your home might be the right decision for you and your family.
To Reduce Payments
If you refinance at the right time, you could find your repayments dramatically lowered. Be careful, though, as sometimes refinancing can seem to free up cash, but this is just short term. Even if you’re saving money, extending your loan beyond its current lifespan could see you losing a lot of money over the years. Choose to refinance while interest rates are low, and you could be paying much less over the same time frame while freeing up cash each month. This is an ideal solution if you are struggling for money day to day as many of us are in the current financial climate. It’s also a good option if you need extra cash short term for a large expense, such as a new car, or to pay for college.
To Increase the Value of Your Home
If you’re considering selling your home, refinancing with lower interest rates could give you a great chance to increase the value of your home. Use the extra cash you’ve saved to redecorate or make any necessary repairs without worrying too much about your repayment term. Increasing the value of your home doesn’t necessarily take a lot of time or work, but it can help you get a much higher price when you sell. This could also be a great option if you are considering letting out your property, either in the short or long-term. Making a few changes to the décor and the structure of your house can also allow you to charge your tenants a higher rent.
To Pay Off Credit Card Debts
Credit card debts can be crippling. During the financial slump, many of us took out loans or borrowed on credit cards just to pay for everyday life. Then, we borrowed more to pay off the first debts. Now, many find that they could be in a great financial position if only they weren’t paying back hundreds of dollars every month for nothing. Repayments and interest rates on credit cards can be extortionate. But with banks now being especially careful, many find it impossible to take out a consolidation loan. Refinancing your home gives you an amazing opportunity to pay off existing debts, leaving you much better off, and in a more stable financial position for the future.
To Increase Your Net Worth
With lower interest rates, smaller monthly repayments, and huge savings over the life of your loan, you could be in a fantastic position to increase your long-term net worth. Use the money to buy real estate, invest, save for your future, pay for higher education or buy a vacation home. Extra money, a better education, and greater assets can lead to many opportunities in the future. Not only will these things increase your worth, they could also help to build a brighter, happier future for you and your family.
To Shorten Your Loan
Your aim might not be to free up cash right now, but simply to shorten the length of your loan. If you currently have 30 years left, refinance to a lower interest mortgage and instead of using the extra cash, keep making the same payments and dramatically decrease the length of the loan. You could potentially pay your mortgage off 10 years earlier, which would save you a fortune and help you get free from debt much sooner.
To Get a Fixed Rate Loan
If you’re currently on a flexible rate loan, your repayments are very much dependent on interest rates. This can be a terrible thing. If you took out your mortgage while interest rates were high, this might well have been your best option. However, waiting until interest rates are low and refinancing your home, this time choosing a fixed rate mortgage, can save you a lot of money, and give you much greater security going forward.
Remember to consider your options carefully, and never rush into any decisions that could affect your long-term financial situation. While refinancing can be a great idea, which can lead to one, or all these things, it must be done carefully and at the right time to save you the most money. Seek advice and weigh the pros and cons of refinancing in your current situation before you act.