Reasons to Refinance

“Debt consolidation”

One benefit to refinance is debt consolidation. For reasons of lowering monthly payments and taking advantage of today’s low home mortgage rates, consumers are refinancing their homes. The average credit card or personal loan has an annual percentage rate of 18-22%. To avoid the high interest rate, most borrowers will decide to payoff their credit cards in the loan. This way they can eliminate their monthly payments on credit cards and use the savings for other purposes.

“Lowering interest rate and loan term”

A benefit to refinance is to lower the interest rate and lower the loan term. By obtaining lower interest rates, you will be lowering your mortgage payments. In some situations where the mortgage payment reduces vastly, home owners are able to reduce their loan term at the same time, keeping their mortgage payments very reasonable.

By lowering the monthly principal and interest payment, you are in a situation to add the savings to your payment, which goes directly to principal. Mortgages are fully amortized which means that payments are both interest and principal. Any payment that is extra from the minimum amount due, goes directly into principal, which will help you pay the loan off faster and save you thousands of dollars in interest.


People have a tendency to focus only on the rate. Sometimes rate is not the only issue. Time is the other key factor. It costs exactly the same to pay back a 30 year loan at 5% interest as it does to pay back a 5 year loan at 30% interest. A smart borrower will understand this. Every situation has its own needs and interest.

Example 1:

For example on an $80,000 loan at 12% for 30 years, the monthly principal and interest payment is $822. By adding a dollar extra a day, you will be able to pay the loan off faster and save thousands of dollars in interest. If you were to add $31 on top of the monthly mortgage payment, you would pay this loan off 7 years faster and save $58,828 dollars in interest. A dollar a day in time has over 5 times more impact than a dollar a day in rate.

Example 2:

Bob is a 30 year old homeowner. He currently has a loan amount of $100,000 at 9% interest for 30 years, the monthly principal and interest payment is $804.62. Bob can pay this loan off faster and save thousands of dollars in interest by being able to save on his monthly payments. By doing debt consolidations, he is able to add $95.11 extra to the monthly mortgage payment. By adding the extra money to the principal every month, he will pay the loan off 10 years faster and save $73,728.94 in interest. At the age of 50, Bob will have his home paid off and now he can invest his $804.62 monthly mortgage payment into a savings account.


Many homeowners are taking advantage of their home’s equity to make improvements in their lives. One of the top reasons for refinance is to take cash-out for home improvements. A home is a great investment because real estate values appreciate vastly in most areas. Cash-out purposes can also be for your business needs, investment opportunities, or any reason you want.

You can take advantage of a low home mortgage interest rate instead of a high rate credit card or personal loan.