People have told you that refinancing a loan could save you money, but do you know how? This article will show you how you might benefit from refinancing your mortgage and how you could save money by getting a better deal.
If you've ever thought that your payments could be a little lower, this article is for you. When the economy was doing better than it is now, many mortgages were made. So you might be one of those people who got a mortgage with a variable interest rate when the economy was good. It was good when you got it because it helped you get the house you wanted, but now you may soon have to pay more—possibly a lot more than you did before. Refinancing could be a great way to solve your problem.
Mix up your debts
If you have more than one type of debt and are paying a high interest rate on some of it, refinancing will let you combine the debt and get a better interest rate. Putting them all together makes writing one check so much easier.
Cut the length of your term
With many mortgages, the length of the term lets the lender add a lot of extra interest to the loan. The amount of interest you pay goes up the longer the term is. By shortening the length of your loans' terms and combining them, you can pay more on the principal faster and reduce the total amount you owe.
Get Better Interest Rates
If you have more than one kind of debt, at least one of them might have a higher interest rate. You can save money by taking out a loan when the interest rates are low. You should only refinance your debts, though, if you can get a lower interest rate than you have now. If one or more of your debts has a lower interest rate than the one you are getting, keep them separate and take advantage of the lower rate, but try to lower the interest on all of your debts if you can.
Get Smaller Payments
If you refinance your mortgage, you might be able to get a smaller loan, which could make your payments smaller as well. You will want to make sure, though, that there are no fees if you pay off the loan faster than the term length. As much as possible, take advantage of the smaller payments and pay more than the minimum each month to get out of debt as soon as possible. If you can't pay more than you were before, pay as close to the same amount as you can. This will help you pay off your debt faster.
Earn some extra money
By refinancing, you may also be able to get a little bit of extra cash for one or more home improvement projects. But if money is tight, you might want to put off the extra projects until you pay down some of your debt and build up some equity in the new loan, if the project can wait.
