Refinancing your home provides a wide array of benefits when you do it right. This starts with the obvious, which for most homeowners includes hundreds of dollars in monthly savings. A better interest rate, lower payments, and a good repayment plan can help you take a big jump forward when it comes to achieving all of your financial goals.
Benefit #1: You Lower Your Monthly Payments
Max Funding’s second mortgage consultant Shane Perry says, “paying less per month is always a good deal. Especially when you can then use that freed up money to improve the house, invest in retirement accounts, or pay off debt. All while still paying off your house. That’s a great situation to be in. A difference as small as 0.5% or 1% can make a surprisingly large difference.”
Benefit #2: Tax Benefits
Depending on the situation you may find some major tax benefits. This can be direct or it can be indirect. When you use the equity from your home for retirement funds like an IRA, for an investment property, or for investing in a business you may find there are many tax benefits that you can take advantage of at that point. Even if you keep the money for renovations if they are things like installing energy-efficient windows or adding solar panels you will find yourself able to take even more tax write-offs.
You will want to talk to your accountant to make sure you are getting all the benefits that are available to you.
Benefit #3: Enjoy the Side Effect of an Improved Credit Score
Assuming you use the equity to pay down other lines of credit and make on-time payments, you will eventually see a rise in your credit score. The benefits of this are obvious. You will get better rates on future loans or refinancing deals. You can negotiate for even better rates in the future. This may open up funding for an emergency loan or a business loan that would otherwise be denied.
A good credit score opens a lot of doors. Many people don’t realise just how important this score is for a wide variety of areas that even go above and beyond debt relief.
Benefit #4: Consolidation
Going from a high-interest debt into a low-interest home loan can be transforming. If you roll tens of thousands of dollars in credit card debt at 15% or 20% down to 3% then not only do your payments make a much bigger dent in the actual debt but you free up a lot of money.
This consolidation lets you pay off debt, budget better, and maybe even start saving or investing. Even if you don’t have quite enough to eye retirement, just having that extra money to double down on debt payments now means freeing up more money in the future. Emergency savings and savings accounts do matter and getting rid of the debt that is strangling your budget will only help.
Benefit #5: Stabilises Your Budget
One of the major benefits of a home refinancing is that you can stabilise your budget. The monthly payment becomes predictable and that means you can set your budget, make steady payments, and plan accordingly. These payments are going to stay the same and often be lower than expected. You should take a look at your terms and see if a home refinancing might be right for you.