Time to Refinance and Boost Your Monthly Cash Flow

George Lopez |

House graph

Use the equity in your home to help you achieve financial freedom

Wouldn’t it be nice to have an extra $1,000 in your monthly budget to help with those pesky credit card bills or car loan payments? If you’re like most of us, who wouldn’t? Well, the solution to your cash flow problem may be right in front of you, hidden in plain sight. If you’re a homeowner, one of the most powerful financial tools available to you is the ability to refinance and use the equity in your home to restructure your monthly debts and significantly increase your monthly cash flow. By refinancing your mortgage and getting some additional cash, financial freedom could be just a mere 30 days away.

Financial planners frequently advise their clients to reduce their monthly debts, especially credit card debt, so that they can improve their monthly cash flow and increase their personal savings. However, for many households that’s easier said than done. According to NerdWallet, the average amount of household credit card debt increased by 7% in 2017, to $15,983. When you add in the average household car loan debt, which now stands at $27,669, the average family is carrying over $43,000 in debt and that’s not even counting their mortgage and student loan payments.

As a result, a growing number of homeowners are taking advantage of today’s low interest rates to refinance their mortgages and obtain extra cash at the same time. With property values increasing in almost every part of the country, more and more homeowners are utilizing this simple financial strategy to get extra money to pay off their credit card debts and car loans.

The case for consolidating your debts using your mortgage is very persuasive because your monthly savings can literally be life-changing.

Let’s look at an example:

  Before Refinance After Refinance
Mortgage:    
     Payment (P&I)
     Balance
     Note Rate
 
$980
$179,277
4.875%
 
$1,207
$228,000
4.875%
Credit Card #1:    
     Payment
     Balance
 
$550
$15,654
 
- 0 -
- 0 -
Car Loan:    
     Payment
     Balance
 
$612
$27,669
 
- 0 -
- 0 -
Total Monthly Payments $2,142 $1,207

TOTAL MONTHLY SAVINGS

 

$935.00

A sudden injection of $935 into your monthly budget could have a huge impact on your personal finances. Your results may vary, but this much is clear—a cash-out refinance can provide you with a fresh start and significantly improve your monthly cash flow. Best of all, there is still time to take advantage of today’s historically low interest rates and refinance but you definitely need to hurry. According to NBC News, Federal Reserve Chairman Jerome Powell has recently indicatedthat the Fed may raise interest rates as many as three more times this year.

*In this example, the existing loan (‘Before Refinance’) is based on an original loan amount of $185,000 with a fixed rate of 4.875% and a 30-year amortization. The existing loan (‘Before Refinance’) is assumed to be two years old (24 payments). The estimate of the new loan (‘After Refinance’) is based on a new loan amount of $ 228,000 with a fixed rate of 4.875% (4.955% APR) with an LTV below 75% and a credit score of 740. Figures are estimates only, not a qualified offer; interest rates are subject to change. Loans available to qualified borrowers.


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