Home » 2014 » December

How to save money by refinancing your home

Often times, consumers are faced with daunting bills from credit cards,
mortgage payments, utility bills and other financial obligations. We all
incur these debt with the best of intentions to pay back our creditors
when the bills are due. However, over time debts can out of control and
our ability to budget appropriately becomes more and more difficult due
to limited income and all of our creditor looking to get paid. Surely
there must a way to stretch our money so that we can pay everyone.

Well, there is a way to reduce the money going out the door by leveraging
assets many of us already own. One of the best ways to save money to
help stay current on all of your bills by refinancing the mortgage on
your house. This can benefit you in one of two ways; first, you may be
able to pull out equity from your home to pay down higher interest bills
thereby reducing the monthly payment or eliminating balances on credit
cards. Alternatively, you may be able to reduce the interest rates on
your largest bill, the mortgage, thereby increasing your monthly income
to pay other bills. In addition in some situations, you may be able to
even shorten the term to pay back your mortgage and as a result, build
new equity in your home faster.

Although this may be a good way to help reduce your monthly payments and
make it easier to handle all of those pesky credit cards and utility
bills, you should weight the benefits against the drawbacks. When you
refinance your home, you are starting from scratch. That is, you will be
getting a brand new mortgage and incurring possible closing costs. If
there are costs associated with the refinance, you should find out if
those costs will be added to the mortgage payment, which could change the
dynamics for you. You also want to ensure that your current mortgage
does not have a prepayment penalty hidden in the fine print. If it does,
you will want to add that to the closing costs to be sure you know what
your new mortgage balance will be. In some cases, even though you will
be reducing your monthly payment, you may actually increase the principal
owed on the mortgage, so you do want to make an informed decision as to
what end result best meets your current financial needs and goals.