There are so many different reasons to refinance your home, but every reason has one main goal: to save you as much money as possible. There are so many different things that you could try to save that money: lower monthly payments, paying less in interest rates, or erasing high interest debts. But anyway, refinancing cna have both good and bad short term and long term effects on your personal finances. In this article, we are going to look into two good and bad reasons to refinance your home with that main goal in mind: saving you money.
Here are 2 good reasons you should refinance your home.
- Increasing Long Term Savings
One great reason to refinance your home is to increase your total long term savings. It can help in two main ways. The first way is by getting a lower interest rate that can decrease the mortgage interest that you have to pay over the total life of the loan. The second way is by having a smaller monthly payment so that way more money can go into savings and can be invested for retirement. The first way is definite and will always help increase long term savings while the second way is a little more risky, but can still increase the long term savings.
- Help Pay Off Credit Card Debts
Credit card debits can be very damaging to your credit score, so paying less interest on consumer debt like credit cards will help increase savings. Lots of people typically think that in order to pay off those debts, they have to do a cash out refinance, but that may not always be the best idea because that can lower the equity of the home. A regular refinance is the way to go in that case.
Here are 2 bad reasons to not refinance your home.
- To Have Cash and Go on Spending Sprees
If you want to refinance your home in order to have some extra cash and go on a spending spree or two, you should probably rethink doing so. It is not a very good or safe idea to do since it can cause major debts and if you are unable to make monthly payments or repay the loan, there can be a lot of damage to your day to day life. It is not recommended at all to refinance your home to do this since it also takes away from the home equity as well and can cause you to not be able to get much out of your home in the future.
- Skipping Monthly Payments
If you are refinancing to pay a monthly payment that you had skipped or missed, it is not a very good idea to follow through. It can lead to you losing more money than keeping any. Even if you are using that money to pay a monthly payment like bills, you still have to pay the monthly payment for the loan and you can lose money quite quickly doing that.
If ever in need of professional help with refinancing, contact this Lancaster refinance company.