7 Reasons to Refinance Your Home
When most people buy a home, they picture themself living there for ten years to possibly the end of their life. Changes can happen in that time, from our financial situations to our needs from the space we’re in. Although refinancing is a large step that has to be taken seriously, there are countless reasons to start this process.
These are the top reasons to refinance your home and hopefully set yourself up for success.
1. Consolidate Your Debt
Most people in America have at least a few thousand dollars of debt. Ranging from medical debt to higher education, there’s nothing to be ashamed of: but it can weigh heavily on your wallet. By refinancing your home, you can consolidate your debt to just one location and one payment that you have to make every month.
This makes it easier to keep track of and can help your credit score since you won’t have too many accounts open at once. Although this isn’t the best option for someone who has unsteady spending habits or isn’t great at making financial decisions, asking for help in these situations can empower you to do better.
2. Cash Out For Other Projects
Refinancing can allow you to have extra money to spend on updating and correcting things about your home that drive you crazy. This means that refinancing can give you the option to put in vinyl windows or whatever features you’ve always wanted for your home. Although borrowing against your loan can be an unsure situation if you’re not good with money, as long as you spend it intelligently and budget correctly for your new loan requirements, you should be fine. A faux hardwood floor can be worth it if it means that you get to enjoy living in your home more.
Cashing out doesn’t have to solely be for renovation, though. Many refinance their loans so that they can afford the downpayment to purchase an investment property or another residence. It may seem risky to take money out of your current loan to go towards another loan, but investment properties are one of the best ways to ensure you’ll be able to pay your mortgage and make income in the long term.
Purchasing a second property to own and use privately can be a great idea as long as it’s something homeowners can budget for and aren’t overspending on. This is an investment that will hopefully return their money with profits in the long term when they sell it, rather than through renting.
3. Lower Your Loans Interest Rate
Most of us buy our first homes while we’re starting on our financial paths. It’s okay to admit that you’re still figuring things out initially, but those interest rates can be trouble in the long term. So instead, lower your interest rates by refinancing your home and creating a loan that’s more tailored to you. Although there’s no way to knock off interest all together except for paying early and more than the minimum amount: reducing your interest rate can save you thousands upon thousands of dollars.
4. Cut Down The Length of Your Mortgage
Although there’s nothing wrong with a thirty-year mortgage, many younger people in recent years can’t consider having to live somewhere for that long. Although you can pay off a large portion of your home and sell it and still make a profit after you pay back your debt: that’s not enough for some homeowners. Instead, they want to cut their loans down to ten or fifteen years so that when they sell, they get back the full amount they sell for. This is possible; ensure that you can financially handle this boost in the monthly cost.
5. Get Rid of Mortgage Insurance
Some loans have mandatory mortgage insurance. Usually, those are the government programs for the FHA and USDA loans. Unfortunately, if you don’t want to deal with mortgage insurance, you’re stuck with it as long as you have this loan. You are refinancing once you’re able to give you the chance to knock this insurance off. This can save you $125 or more per month that could be used by investing in the property with metal lap siding or other updates.
6. Lower Your Monthly Payments
If you bought your home while living with a partner or a roommate, and they’re suddenly not going to live with you anymore, you’re losing out on that money that could go towards the monthly mortgage payment. Although this could boost how much you owe through interest rates, refinancing so that you can afford your monthly payments a little easier isn’t unheard of. It might be a better idea to look at renovation projects like black bathroom fixtures and consider updating the space to sell instead.
7. Your Financial Situation Has Changed
If your credit score has gone sky-high since you purchased your home, it’s time to consider refinancing your home. This means that your interest rates will be lower, and you could get a better deal on your loan than you did when you bought your home. In addition, House payments are often the largest bill in our lives, so if you decided to shorten your loan and boost it higher because you’re suddenly making more money, this could be a fantastic way to buy your home faster so that you can sell it more quickly.
Refinancing Is Taking A Step Towards Your Future
Although refinancing a loan may feel like a huge amount of work to undertake, this isn’t something to stress about. Instead, put in the time and effort to research what type of loan would be best for you and work to find a financing plan that works as well.
Refinancing gives you the chance to alleviate some of your monthly financial burdens and get rid of the interest that takes up tens of thousands of dollars on your home loan. As long as you choose carefully and ensure that you stick to your payment plan, you’ll have a loan that’s bespoke to your needs.
Ryan Shure is an editor for the Innovative Building Materials blog and a content writer for the building materials industry. He is focused on helping fellow homeowners, contractors, and architects discover materials and methods of construction that save money, improve energy efficiency, and increase property value.