Your financial health is the combination of your credit, your debt, your savings, your income, and all your investments. The better off your financial health is, the better off your mental and physical health is. It is an aspect of your life that you should take very seriously and make every move possible to continue improving upon it.
You may have been told once or twice that refinancing your home loan can boost financial health. Since you are taking out another loan that will go against your debts, it seems like a curious statement for people to make. But, the fact is that it can help your overall financial health. Let’s take a look at how this is possible.
- Decrease The Amount Of Monthly Payments – When you have high monthly payments, it feels like you have no breathing room. That you live paycheck to paycheck without any end in sight. When you refinance your home loan, you can decrease the monthly payment to a much more manageable one. Leaving a little extra cash in your pocket for other things.
- Decrease The Length Of The Home Loan – This step will not help your financial health right away, but when you decrease the loan length, you will be paying it off in a shorter time. This means that you will be out from under the mortgage payment sooner. Once that happens, your financial health will skyrocket. Keep in mind, though, that to do this, you will need to refinance your loan at the same payment level, or possibly a little more, to reduce the length of the loan.
- Decrease The Amount Of The Interest Rates – One of the most significant issues with any loan, especially a large home loan, is the interest your lender is charging you. After you have built up some equity, you should start checking around to see if you can find a lender that will offer you lower rates. This is a great way to boost your financial health because it lowers the monthly payment amount, or you can decide to decrease the loan length. Either way, it is worth taking the time to do a home loan refinance.
- Cash Out Your Equity – When you use a refinance loan for this option, you will get into a loan that will once again increase in length. The key to this is to get the loan when the interest rates are low, so you can keep the size of the loan shorter while keeping close to the same payment amount. This helps your financial health by giving you extra money to pay off other bills or improve your house, which will increase the overall value of your home. Either way, it will improve your health.
- Lock-In A Low Interest Rate – High-interest rates can increase your monthly payments by a substantial amount, plus they mean that you are paying more for your home than you should be. Interest is how banks make money, so you can expect to spend some. When you refinance your loan at a lower interest rate, you want to lock it in instead of opting for a variable-type loan.
You can see that refinancing your loan can affect your debt and credit in several ways. If you play your cards right, it will improve your financial health while giving you the benefit of the loan you choose to go with. This will positively impact your financial health and strengthen your financial position. This means less stress, which helps maintain your mental and physical health at a level that does not put you in the hospital.