When to Refinance:
Refinancing your mortgage is something most homeowners consider at least once throughout the lifespan of their home loan. It allows you to pay off your previous loan by applying for a new one that has better financial advantages. While there are many good reasons to refinance, here are five common ones.
Scoring a lower interest rate. The number one reason homeowners decide to refinance is to secure a lower interest rate on their mortgage. Not only does this save you money in the long run and decrease your monthly payment, but you can start building equity in your home sooner.
Using an improved credit score. Even if interest rates have not dropped in the market, if you’ve improved your credit score over the last few years, you may be able to reduce your mortgage rate.
Shortening the loan’s term. If interest rates are decreasing, there is a chance you may be able to get a shorter loan term with little to no change in your monthly payment, allowing you to pay off your loan sooner.
Switching from an adjustable rate to a fixed rate. If you chose an adjustable-rate mortgage with great introductory rates when you initially financed your home, that rate may increase significantly over the years. By switching to a fixed rate while interest rates are low, you can protect yourself from future increases.
Cashing out home equity. If there is a big purchase or payment on the horizon, such as funding a wedding or going back to school, your best option may be to use the equity you’ve built in your home to borrow money at a lower cost.
Put More Money in Your Pocket Each Month
Reviewing your monthly expenses once a year is a great practice to get into. As you look at your monthly budget, you will find some expenses that are fixed, like your rent or mortgage, car payments, and child care expenses. But there are several other common monthly expenses that should be reviewed and re-negotiated each year.
Call your current car insurance provider and shop other providers to make sure you have the lowest possible premium at that time. Contact your cell phone carrier to make sure you have the best and lowest cost package currently available. Shop health insurance each year to make sure you are covered at the best possible price. Contact your gym to make sure you are paying the best current pricing for your membership.
Research your cable and internet provider’s offers online then give them a call to make sure you have the best pricing for your services. Cable and internet companies often have promotions or package pricing that could be lower than your current bill. Do an audit of all online and app subscriptions you have to make sure you are not paying monthly fees for apps you signed up for in the past that you are no longer using. You will be surprised what the small fees add up to!
Don't stop here! Analyze your monthly recurring payments and see how many of them you can bring down. The compound effect will give you a nice monthly raise.