Planning Your Financial Future with a Refi

Refinancing is a way for many homeowners to either lower their payments or restructure their mortgage in a way that will ultimately save money or at least free up cash for other endeavors.  While it always makes sense to save money where you can and lowering your overall debt is a preferred way of doing so, your financial future has a lot to do with how exactly you go about doing that.

On the surface, refinancing makes sense for most folks, but for others, refinancing could actually end up costing more money in the long run.  Here’s our guide to planning your financial future with refinancing.

Put Your Interests in Interest

Generally speaking, refinancing your mortgage could lower your interest rate.  Additionally, it may lessen the repayment terms of your loan which could actually make your monthly payment higher.  And while lowering your interest is great, there may be some reasons to actually retain your existing mortgage.

In the event that your interest rate is acceptable and you think you can get higher yields putting additional money into an investment or fund, then it may make sense to do so.  Assuming that restructuring your mortgage means a higher monthly payment, then diverting the difference between that payment and your current one into a high yielding investment may have a more impactful bearing on your financial future.

Refinancing Has Costs

Refinancing means a new loan for you on your home.  While, yes, you’re still essentially keeping the debt, your lender has to create an entirely new loan for you in order to take advantage of refinancing.

That said, just like your original loan, there may be origination fees and closing costs along with other fees and costs just for taking out a refinanced note.  Depending on the amount of your refi, that could end up costing you several thousand dollars that could otherwise be put into making a larger principal payment or put into a high yield fund.

Savings Should be Significant

Regardless of how you refinance, the savings or at least the cost-benefit of refinancing should make a significant impact on your personal finances, otherwise, it may not be worth the hassle.  For example, refinancing just to save a few fractional percentage points on your interest probably won’t be enough to truly save much at all.

On the other hand, reducing your interest rate whole percentage points could very well save you thousands of dollars in interest over the course of a refinanced note.  Additionally, it may be worth it to you to restructure your loan in a way that actually reduces your payment if you need to free up funds for something else.

No matter the case, if you’re looking to refinance in order to save money or set yourself up for a better financial future, make sure it works for you and be certain that the savings are worth the extra costs and time.

Refinance with the Pros

Refinancing can be a godsend to homeowners looking to get their home paid off or to get the cash they need to make major home improvements.  If you’re looking into refinancing your home and want to know what’s best, then contact one of Tidewater Mortgage Services, Inc loan experts today!


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