6 Surprising Benefits of Refinancing Your House

As home values spike, it’s a good idea to take a look at the amount of equity you have and consider whether a refinance is a good idea for your household. A refinance can allow you to restructure your household finances and may lower your overall payment load.

1. Consolidate Debt

If your debt load is high, especially if you’re carrying a lot of credit card debt, a cash-out refinance can help you reduce your overall payment load each month. You can also lower the interest rate you’re paying each month by consolidating that debt into a refinance of your mortgage.

2. Shorten Your Mortgage Term

You may also be able to refinance to a shorter-term mortgage. If you’re managing your household debt well but have a 30-year mortgage, switching to a 20 or 15-year mortgage could be an effective way to pay off your home more quickly. You’ll probably be able to lower the interest you’ll pay over the life of your loan with this refinance as well.

3. Lower Your Mortgage Payment

Many people have struggled to save up a 20% down payment. If you owed more than 80% of the total value of the home when you bought it, you have probably been paying PMI, or Private Mortgage Insurance. If your current mortgage balance is less than 80% of the newest valuation, a refinance can help you remove the PMI and may lower your mortgage payment.

4. Boost Your Credit Score

It’s true that, after a refinance, you may notice a slight dip in your credit score. However, if you take cash out of your home and pay down other debts, your score will bounce back. If you clear the debt on several credit cards with the cash from your refinance and keep those accounts open but don’t use the cards, your score will likely rise quite rapidly.

Boosting your credit score offers many benefits. You may be able to get a better rate on your car insurance once your score rebounds!

5. Lock In Your Interest Rate

If you’ve been watching interest rates rise on your variable-rate mortgage, it’s time to lock in a rate. Knowing what the interest will be on your mortgage offers you a great deal of security. You can build your budget in confidence, rather than wondering what your house payment will be next year.

6. Increase the Value of Your Home

The cash from your refinance can be put right back into your house. If your family is growing, you can expand your living space by adding bedrooms and another bathroom. If you’re planning to retire in this home, you can make changes to the layout to increase your safety and comfort as you age.

There are many people struggling with financial insecurity at this time. If you are a homeowner, a careful review of the latest valuation of your home could give you some surprising options to improve your financial outlook. Speak to a financial advisor to learn more about the refinancing process and if it’s right for you. Your advisor can provide the right advice.