Ways Refinancing May Help You Grow Your Wealth

Refinancing is a way to lower your mortgage rate or make other changes to your loan. For example, you can make the term longer or shorter, or change the format of your mortgage rate. There are multiple ways in which refinancing can help you grow your wealth and make progress toward your retirement goals, some more obvious than others. Let’s take a look.

1. You might be able to get rid of high interest debts. One thing you can do when you refinance is roll high interest debts into your new mortgage. This is a process known as “consolidation.” The value of consolidation is that now, you just pay the interest rate on your mortgage on the debt that used to be subject to higher interest rates. So, you will spend less money on interest for those debts every month. That frees up more money for other purposes.
2. Make improvements to your home’s efficiency. If you get a cash-out refinance, you free up funds to spend on home improvements. Even though making upgrades to your home will cost you money in the short run, it could end up saving you money over the long haul, depending on the types of improvements you decide to make. A simple example would replacing your windows and doors with more energy-efficient glass, or adding solar panels to your roof. These types of upgrades can make your home more energy efficient, saving you money on your electrical bills over the years to come.
3. Pay less interest on your home loan. Many people refinance when mortgage rates are lower than they were at the time that they took out their home loan. Refinancing lets you lock in the current lower mortgage rate as your new fixed rate going forward. With that lower rate, you will pay less in interest every month. If you have an adjustable mortgage due to adjust to a higher rate, refinancing also lets you switch to a fixed mortgage rate, stopping any further ballooning of your rate. In some cases, refinancing may make it easier to pay off your mortgage sooner then you originally intended. This, too, is another way of reducing the overall amount of interest that you pay on your home loan.
4. Invest more money. Let’s say you reduce your interest rate through refinancing, and/or you extend your loan term, reducing your payment amount every month. Now you have some extra room in your budget. If you don’t need that money to pay bills, you could think about investing some or all of it. Investing the money gives it the chance to compound. If your investments are growing at a pace that surpasses the interest on your home loan, you could come out ahead in the long run, even if it means you are taking more time to pay off your mortgage. The earlier you invest, the more time your money has to grow in your retirement accounts.

Refinance in Washington State and Colorado

If you have questions about refinancing, or want to start the process now, please give us a call at (206) 352-6453. We can help you refinance in Washington State or Colorado. Let’s make your finances more flexible and give you a boost on working toward your long-term financial goals.