FINANCING YOUR HOME
Refinancing for Lower Interest or Cash Out
Other things being equal, what homeowner wouldn’t refinance a house with lower interest or lower monthly payments?
Mortgage interest can make or break one’s financial plans because it determines how much spare cash one has on hand for market investments. But interest generally must be lower than what you now pay and high interest makes this problematic.
One can also refinance for better terms or more cash. Borrowers who paid off much of their mortgages can refinance for lower payments or take out second mortgages to pay for home improvements, vehicles or credit card relief. If you had a $20,000 revolving credit card debt at 30% rates, you would pay about $6,000 a year of interest. A hypothetical 7% home equity loan lays your house on the line, but it cuts interest payments to just $1,400 yearly.
Cash out loans can quickly dissipate wealth for some, but others might use more cash for critical medical or education needs or for businesses and rental properties that make the difference in life.
Always ask if the loan will make you money or save you money and in what time frame. Planners can calculate the worthiness of investments in time value of money calculations, and the loan justifications to finance them. Are those solar panels really a good deal? You may be delightfully surprised.
As your fiduciary in mortgage and planning, I can help you to weigh the benefits of stock, bond, real estate or business investments.
“Refinancing your mortgage usually makes sense if you can lower your interest rate by at least two points. But the most important question to ask yourself is, how long will it take you to break even?”
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Mortgages offered through Hill Mortgage
NMLS# 309812/2134092
DRE# 01332532/02142750
Carpe Diem Mortgage
NMLS #2565162
DRE #01214571
