Mortgage refinance: a tool to reduce debt.

...when to refinance a home mortgage and what to do with the money!

Refinancing an existing home mortgage can benefit your personal finances in many ways. 1) A mortgage refinance can be done to get a lower interest rate, saving you money over the length of the loan. 2) It can give you a lump sum amount of money (from the equity in your home) that could be used for existing debt elimination, starting with any of your highest paying debt. These debts are generally credit card debts. 3) The money from a mortgage refinance could be used to start a new company, fund other expenses that carry higher interest rates than the mortgage rate, or used for other necessities.

A mortgage refinance can be an excellent tool for reducing or eliminating household debt. However, it carries risks that need to be considered thoughtfully. There is a cost to refinance. Is the extra cost worth the money you will save by a lower interest rate? Additionally, the new mortgage loan might be for a higher amount than the original loan...are you comfortable with this new payment amount? Often people use the home equity as a downpayment on the next home they purchase, if you use the money somewhere else (to pay off existing debt), how does that affect long term financial goals? Finally, if you are considering refinancing your mortgage to pay off existing debt, perhaps your time would be better spent examining why you are in debt in the first place and reducing your expenses.

Ultimately, whether you choose to refinance your mortgage or not, the decision is yours. Consult your tax attorney or financial advisor to determine if that decision is best for you.

Thoughts on a mortgage refinance:

If you have recently refinanced your home mortgage, let us know how that affected your personal finances. We are interested in sharing your story with others.