Ways Refinancing Your Home Can Help You
When you are putting your kids through college, struggling to pay off debts, and/or recovering after an emotionally turbulent divorce, refinancing your home may be the last thing on your mind. However, what you need to know is that your home is probably the most valuable asset you own, and it is crucially important to your financial future—and the future of your children—to make wise decisions regarding this “cash cow.”
What is Mortgage Refinancing?
Mortgage refinancing is exchanging your home loan for another loan with a lower interest rate. It can also involve switching your Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage (FRM) that allows you more steady bills so that your mortgage payment does not fluctuate with the whims of the housing economy.
How Will Refinancing My Mortgage Benefit Me?
Mortgage refinancing provides numerous benefits to homeowners looking to improve their financial future. Consider the following advantages of refinancing your home:
Finance Home Improvements
When you pursue a home improvement mortgage refinance, you often engage in what is called “cash-out” refinancing. This means that you refinance the home for more than it is worth and keep the remainder. By taking this remainder and reinvesting it in the home, you are using your home’s equity to increase its value. This can be a smart economical strategy that improves your home’s value before selling. Since home improvement mortgage refinance adds interest to the life of your loan and requires up-front payment of refinancing fees, you should speak to a qualified attorney about whether a home improvement mortgage refinance is the best way to meet your financial goals.
Pay for College Tuition
Let’s face it: college tuition is getting more and more expensive. Gone are the days when kids could put themselves through college by working a steady job. As a father, you understand the necessity of a college education but are probably understandably anxious about the day when you will have to begin making payments towards your child’s education. With cash-out refinancing, you are able to tap into the equity in your home to finance large expenses (like college tuition). However, you should speak with a qualified mortgage advisor before making the decision to refinance: he or she should be able to evaluate your financial situation and determine if cash-out refinancing is an economically viable way for you to finance your child’s college education.
Obtain Lower Monthly Payments
One of the main draws of refinancing is that you are often able to obtain lower monthly payments as a result of securing a reasonable home mortgage refinance interest rate. Since interest rates are at a record low, you may be able to qualify for a rate significantly lower than your original interest rate.
Pay off Other Debts
With the money you save through obtaining a lower home mortgage refinance interest rate, you can work towards paying off your other debts. In addition, some borrowers use refinancing as an opportunity to use the extra cash to build up their IRA, 401 (k), retirement, and other funds.
Avoid Financial Distress
With lower monthly payments, you may be able to avoid financial difficulty (including bankruptcy and foreclosure). In addition, if you qualify for cash-out refinancing, you may receive a substantial amount of extra cash (equal to the differential of your home’s equity and the amount you refinanced for) that you can use to catch up on delinquent accounts.
To determine whether refinancing is a viable option for your unique situation, consider speaking with a qualified mortgage broker. He or she will help you determine if refinancing your mortgage is the best way to meet your financial goals. If you feel your financial situation is complex, consider consulting with an experienced real estate or estate planning attorney. To locate an attorney in your area, utilize the attorney directory AttorneyLocate.com.