Refinancing your home is one of the best things that you can do for your budget. If loan rates have hit a new low and you have been paying on your loan for several years, you should look to get your mortgage refinanced at a lower rate. Provided you have a good enough credit report, and your home is in good condition, refinancing will save you money each month and money in the long run. The one plan that you should make is what to do with the extra money that you are saving each month after refinancing. Here are three ways to spend refinancing savings to boost your financial standing.
Pay an extra mortgage payment
After refinancing, you will find that your monthly mortgage payment decreases. Although this allows you to pay less for the house each month, you should consider making one or two extra mortgage payments per year. Some mortgage companies will allow you to make a payment towards the principal of the loan. Even if the loan applies towards the interest, you will be able to pay off the loan several years early with one or two extra mortgage payments per year.
Start some improvements
If there is anything in your home that could use some sprucing up, take the money that you are saving from your old mortgage payment and put it towards the repairs. You will want to get started with home repairs as soon as possible so that a small issue does not become a high-cost fix. If your home is newer and in good condition, put the money towards small improvements that create a better atmosphere. Plant trees and line your front yard with upscale hedges. Install led flood lights to light your backyard or upgrade your alarm system to increase your home's value.
Start a mortgage payoff fund
Along with a retirement fund and life insurance, you should consider a mortgage payoff fund. When you retire, you may not want to have to continue to make mortgage payments out of your 401K. If you plan to put your children through school, paying off a mortgage alongside tuition payments can be daunting. Put the extra money after you pay the mortgage and make your regular contributions to a mortgage payoff fund. Once the fund matches up with the payoff needed for the house, send in the last home payment. This will give you more financial freedom in a shorter time period.
For more information, contact your local refinancing services.