How do you feel when you hear the word mortgage? Does it make you feel concerned? How about uneasy? Unfortunately mortgages can be seen as confusing and something to be avoided instead of a tool for improvement. Because of that "bad reputation," it can be easy to forget all of the benefits that come from having a mortgage, like building up equity and creating a home that’s your own. Realistically your mortgage has a lot to offer, you can even use it as a financial tool to help you improve your lifestyle and financial position.
Equity - The Key to Using Your Mortgage as a Financial Tool
Over the past few years home values have been increasing at a fast rate. According to CoreLogic home prices have shot up 10% just in the last year. That means you’ve got extra equity built up in your home, even if you haven’t owned it for very long. That equity is the key to using your mortgage as a financial tool to improve your situation. By tapping into your equity through a refinance, you can use your mortgage to pay off high interest loans, invest in your future, make home improvements, or simply free up some extra cash.
Pay off High Interest Loans - Like Credit Cards
Debts like quick cash loans, credit cards, auto loans, etc. can be frustrating for a few reasons. First you’re dumping so much money towards your interest. Instead of paying down what you owe, you spend most of the time just paying off the interest each month. High interest debts can also be a problem when they start to pile up. If you’ve experienced it, you understand how hard it can be to get out of debt and the frustration that comes with having a lot of debt. Unfortunately a lot of Americans have the same problem, and many of them feel like it’s hard to pay off all that debt. A recent survey by creditcards.com discovered that 68% of respondents aren’t “confident that they will every pay down all of their debts.”
Your mortgage is one of the best tools available to get rid of high interest rate debts. Instead of trying to track all of your different bills and putting tons of money towards interest, you can consolidate those debts into a simplified mortgage with a low interest rate. It will help you save money and feel more secure.
Here’s an example of how a recent customer saved $643 a month by using a new 30 year mortgage to consolidate high interest debt:
Using a refinance to pay off high interest monthly debts is a great way to improve your lifestyle, but it can’t fully eliminate your monthly debt obligations as your mortgage will remain.
Invest in Your Future
Your mortgage can really help with your financial future when used appropriately, it just depends on what your goals are.
1. Are you looking to build up your retirement? Putting money towards your retirement today will help you get further ahead tomorrow right? Your mortgage offers you a chance to do just that through a refinance. If you apply the savings you receive from lowering your monthly mortgage payment towards your retirement that money will grow exponentially. Lowering your interest rate, removing mortgage insurance, or extending the term on your mortgage are all options to help you lower your monthly mortgage payment and start investing.
2. Are you looking to make a big investment, like buying a rental property? These types of investments typically require a lot of cash up front. You can draw from the equity in your home to help create the required cash for these types of investments. Using this strategy will help you get your business up and running without the need for a high interest business loan.
If you’re like most homeowners, you’ve probably got a list of improvements you’d like to make to your house. Maybe you’ve talked about adding another bedroom or upgrading the kitchen. Your mortgage is the tool to help you make those ideas come to life. You can use a portion of the equity in your home to pay for your renovation costs. That way you can create a stunning new look in your home without taking on a high interest loan. Plus home improvements often increase the value of your property.
Free Up Extra Cash
Sometimes it just feels good to have a little extra cash. It gives you some extra breathing room and allows you to spend more time doing the activities you love. You can free up some extra cash each month by lowering your interest rate or getting rid of mortgage insurance through a refinance. You should periodically check with a loan officer to make sure you aren’t missing out on an opportunity to save a little money on your mortgage.