Why Wealthy People Refinance Their Mortgages

Why Wealthy People Refinance Their Mortgages

Why Wealthy People Refinance Their Mortgages

Wealthy people use their mortgage as a tool instead of as a crutch. Among other things, wealthy people use a home loan to build credit, improve cash flow, and facilitate your lifestyle. 

 

To make the most of your mortgage, it’s important to kеер it up-to-date as circumstances change. By this we mean making sure that your current mortgage reflects your growing equity and financial goals. One way to capitalize on your mortgage is to refinance. By replacing your loan with one that better suits your current needs (whether that means a lower rate, different loan term, or different rate type), you can get more value out of your mortgage.

 

Here are the top four reasons why you should refinance:

Save Money on Monthly Mortgage Payments

The top reason people talk to us about refinancing is because they may be eligible for a better interest rate. Getting a lower rate could reduce your monthly payments and save you a considerable amount of money over time.

 

When you first applied for your home loan, your financial circumstances influenced the interest rates available to you. As your personal situation improved, you may have qualified for a better rate without even knowing it.

 

In addition to a new financial situation, another reason to refinance is that your lender could have raised rates recently, making now the ideal time to look into other mortgages.

Invest in New Property with Your Equity

Property investment is one of the most popular ways of building wealth. Saving up for the down payment for a second property may be difficult, but recent rises in property values have provided a unique opportunity. Now you can refinance in order to gain access to your home equity and use that as a down payment instead.

 

Your home equity is calculated by subtracting the amount you owe from the current value of the house.

 

(current value of house) – (amount you owe) = home equity

 

In order to refinance, you must first have a property assessment to determine your home’s current value.

 

Accessing your equity will increase the amount you owe on your original property and your mortgage payments. However, if you use your equity to make a property investment, you can start building equity on two properties (instead of just one) to increase your wealth and net worth in the long run. 

Renovate Your Home

Renovating your current home to adapt to a lifestyle change is often more feasible than purchasing an entire new home. By renovating or expanding, you’ll be able to create a home that meets your needs, while increasing the value of your house. Even though you’ll need to access your equity to do this, your increased home value will offset this cost.

 

Even if you don’t want to renovate, maintaining the value of your largest asset is also important. If your home could do with an update, don’t hesitate to talk with us about refinancing to renovate.

Consolidate High-Interest Debts

Your home loan interest rate is probably the lowest form of interest you’ll need to pay on any loan. In comparison, credit card interest rates can be five times higher than your home loan interest rate. Other expensive debts like car loans or personal loans can also tie up your money and prevent you from doing more with your investments.

 

If your home value increased over the last few years, you should consider accessing your home equity to pay off expensive debts. This could dramatically reduce the amount of interest you have to pay back on your overall debt, offering your some financial relief and allowing you to enjoy a more comfortable lifestyle.

 

It’s a far better idea to save money each month than to waste it on expensive credit card interest. By refinancing to consolidate your debts, you can save money to make other investments or even pay off your home sooner. Ask us to crunch the numbers for you, and we can see if refinancing to consolidate debt would be a good idea for you.

 

For more help with mortgages, feel free to reach out to the experts at Shop Your Own Mortgage today.