Your Houston Refinance Resource

Getting a Houston mortgage refinance is a great way to reduce your monthly cash out-flow. By paying less on your mortgage each month, you’ll have a bit more money at the end of the month. If you’re not careful, this extra cash can easily just get absorbed into your day-to-day expenses. On the other hand, if you are careful and disciplined, this extra money can go a long way towards helping your overall financial situation. Below you will see a few of the possibilities.

The biggest thing to realize is that it doesn’t take a lot of money every month to have a significant impact on your long term situation. When someone wants to take advantage of this new found savings to address their net worth, there are basically 3 ways to approach it.

1. Paying off (or down) other debt that you have at a higher cost, such as credit cards

2. Apply it towards paying down the principle on your mortgage

3. Invest the funds towards bigger goals down the road such as a child’s college expenses or your retirement fund

If you are carrying other debt, such as multiple credit cards or auto loans, it is important for you to compare the costs (i.e. interest rates), balances and mandatory minimum payments to one another. 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.

Let’s say that you have balances on 3 credit accounts as follows: Creditcard #1 has a $4,000 balance at 16%, Credit Card 2 with a balance of $8,000 at 12%, and the third is an auto loan of $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 (assuming you didn’t add anything to the balance over that time). 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. When that is gone, apply both the $175 and the minimum payment you were making to the first card to the second. By sticking to this plan you would be able to pay off BOTH credit cards in only a little more than four years. Much better than 23 years! Just think of the amount of interest costs you would be saving…

So as you see, refinancing your Houston home loan can make a lot of sense for your short term needs, but now you can see how much it can have an impact on your long-term financial health as well.