Debt Free, Schmebt Free?
Living debt free is a life-long pursuit for many people. Having no debt frees up cash for other purchases, means paying no more interest, and removes the financial shackles of your creditors. Yet you could have a mortgage, a car loan, and multiple credit card loans – paying off all that debt seems like light years’ away! And with all of your regular expenses, like groceries, taxes, and other expenses that crop up when you least expect it, being debt free looks like the stuff of fairy tales.
Is paying off all of your debt realistic? That depends. It is for some people, who make it a priority above all else. But the amount of belt-tightening you have it go through would make life pretty darn bleak And circumstances may not allow for it, especially if you have kids, aging parents, and only mid-income careers.
However, you don’t have to stay in the same spot. By scheduling an appointment with a mortgage lender such as Shamrock Financial, you can attack your mortgage and all of your other debt, with a little money left over at the end of every month. Sound impossible? If you refinance, it isn’t.
Refinancing: This is when you take your old loan and replace it with a new one that has a lower interest rate or better terms.
Why Should You Think about Refinancing?
There are different reasons why you would consider refinancing as a debt reduction tool:
- Get a better interest rate: With interest rates still at historic lows, refinancing can let you pay off your debt while paying less in interest over the life of the mortgage. This means more money in your pocket to pay off other debt, or to set some aside for when the unexpected strikes.
- Stretch out that term: If you already have a low interest rate but still need some wiggle room, you can also refinance to get a longer mortgage term. This means you would take longer to pay off your mortgage, but have more money in your pocket every month. No more being stretched to the limit every month!
- Consolidate debt: Bills, bills everywhere! Each month, another bill. Did you pay the second credit card bill? What about the student loan? Did you forget about the car one? By consolidating all of your debt into your mortgage, you only have to keep track of one bill every month. This makes debt repayment quicker, easier, and less stressful.
What Else You Need to Know
Ready to jump onto that refinancing train? Hold your horses! Refinancing is a large financial transaction, which means you need to make sure that it is, in fact, a good decision. There are implications that could make refinancing less than great. Keep these considerations in the mind:
- Fees: Yes, there are fees involved in refinancing. Because you are getting essentially what is a new loan, you will have to pay for all of the bits and pieces that came with the first loan. Legal fees, home appraisal, discharge fees, and more could all come up your alley. Do you have enough cash floating around to pay for these expenses, and will they be worth the money you could eventually save through refinancing?
- Timing: If you have lived in your home only a short time, let’s say less than 5 years, you may not reap the benefits of refinancing. That’s because your interest charges are not spread out evenly over the length of your mortgage — they are more top-heavy. So for the first 5 or 7 years, you are paying more towards your interest than you are towards the principal, and that means you aren’t building a whole lot of equity. Refinancing at this time would reset everything – including the creation of that equity.
- Your financial habits: Do you know what kind of money personality you have? If you have extra money in your pocket, will you go out and spend it, or would you take the prudent route of paying your debt? If you are more likely to spend it, then refinancing, with its associated fees, may not be the best move right now.
Shamrock Financial and Your Options
To refinance or not? If that is the question, come in to Shamrock Financial. We can review your finances, discuss your options, and address your financial personality. The road to being debt free doesn’t have to be a never-ending one. Let’s start tackling your debt and put more of your hard-earned money in your pocket.