Long Term Benefits of a Baltimore Mortgage Refinance
If you’re looking to save money on your monthly housing expense, refinancing your Baltimore mortgage is a great way to go about it. By paying less on your mortgage each month, you’ll have a bit more money at the end of the month. It’s easy for this extra money to seem to simply disappear into your regular, daily living expenses. However, with a little bit of effort, self discipline and a plan, you can make this money go a long way towards improving your overall long term financial position. We’ll outline a few of those possibilities here.
It doesn’t take a huge amount of monthly savings to have a big impact on your long term future. There are typically 3 areas that can be addressed when someone wants to take advantage of these new found savings from a mortgage refinance to improve their net worth.
1. Paying off (or down) other debt that you have at a higher cost, such as credit cards
2. Paying down the principle balance on your Baltimore home loan
3. Using the money to invest in future goals such as retirement or a college savings
If you do have other debts (like most people) such as several credit cards or maybe a car loan, you should compare everything from the interest rate to the minimum payments necessary to the outstanding balance of each against the other. Assuming you’ve been making just the minimum required monthly payments on these, you should now organize them by interest rate, going after the highest one first.
To illustrate, we’re going to use the following hypothetical debts: First Credit Card with $4,000 balance at 16%, Second Credit Card totals $8,000 at 12%, and a Car Loan for $21,000 at 4%. Let’s also say that through your mortgage refinance you’ve been able to gain a savings of $175 per month.
Assuming you were making just over the required minimum monthly payment on your two credit cards, the time it would take you to pay them off completely would be twenty-three years (and you would have to refrain from adding anything to the balance during that time, or else it would just take longer). If you were to decide to use that $175 to regularly apply towards these existing debts in an effort to pay them off, this is how we would recommend you approach it:
First, pay off the highest interest card while maintaining your regular minimum payments on the lower card. Once the first card is eliminated, apply the $175 to the next card (remember to also apply the minimum payment you had been making to BOTH cards). If you were to follow this plan, you could pay off BOTH cards in just over 4 years. That’s a whole lot less than twenty-three! Just think of the amount of interest costs you would be saving…
As you can see, a mortgage refinance can help you a lot in the short term, but can also impact your long term financial goals as well.