Refinance to Lower Your Monthly Expenses

When most people think of refinancing they are thinking in terms of lowering their rate of interest or their monthly payments. Even as interest rates are rising, refinancing often makes sense for many American households. Even if you have to slightly raise the rate of interest that you are paying, if you can refinance to pay off other high interest debt you will likely see a huge improvement in your monthly cash flow. It is often more beneficial to lower your overall monthly expenses, not just your mortgage payment.

Remember that the interest you pay on your mortgage is tax deductible, where as the interest on your credit cards are not. That is why a slightly higher mortgage interest rate, is not as bad as most consumers may think.

You can lower your monthly expenses by refinancing into an interest only loan. This will help you to save a good amount of money from your monthly mortgage payment alone. If you were to consolidate debt in your refinance and switch to an interest only loan this would save you a lot of money per month and truly maximize your monthly cash flow.

Make sure you are certain that the end result will benefit you financially. Instead of refinancing your whole mortgage you may want to take out a second mortgage or HELOC to reduce debt payment amounts.

When analyzing the benefits of a refinance you should look at both the short term and long term financial benefits. You should consider the length of time you plan on staying in your current property, how much you will save over time, and how much you will save monthly. A good way to figure how beneficial a refinance can be if you are paying off debt is to figure how long and at what cost it will take to pay off you current debts at the payment levels you are currently making.

Revolving debt interest rates are generally much higher than mortgage rates. In today's market many credit card companies are raising the minimum payments considerably. This causes hardship in many households. Often times refinancing and paying this type of debt off through the loan can be very beneficial.

Be careful not to squander your home equity. Sadly, in many cases a family will take cash out of their home equity to pay off high interest rate credit card debt but only a few months later have the credit cards charged up again. In this instance you have traded unsecured credit card debt into a secured debt the lender can and will repossess: your home!

If you are self employed, a small business owner, or your income is derived from real estate investment property or rentals, one of the most popular ways to reduce your minimum monthly mortgage expenses is by refinancing into a mortgage with minimum payment options. These mortgages allow you to trade illiquid equity in the property for a payment which is often half of a regular monthly mortgage payment. These pay option or cash flow mortgages have fixed and adjustable rates, however they may not be a good choice for homeowners who have little or no equity, or borrowers who wish to retire in the home which they are refinancing.

You may want to consult with a credit counselor to be sure that you have enough income for your budget. You do not want to refinance over and over until you run out of equity in your home.

» DISCLAIMER: The information contained in this article on 'Refinance to Lower Your Monthly Expenses' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.