CM – 4 movements of money that are better than refinancing

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by Christy Bieber | August 29, 2021

Many or all of the products here come from our partners. We can earn a commission from offers on this page. This is how we make money. But our editorial integrity ensures that the opinions of our experts are not influenced by compensation. Conditions may apply to the offers listed on this page.

Refinancing your mortgage can be a great way to save money in certain circumstances. Refinancing can potentially reduce your monthly mortgage payment. You may also be able to lower the total amount you have to pay over time.

The savings can come from lowering your interest rate, which reduces your payment. And as long as you don’t lengthen your payout time too much, over time it could reduce the overall interest as well. However, most refinance loans require you to pay upfront closing costs. These can amount to several thousand dollars.

Before you decide to refinance, check whether it makes financial sense based on your situation. And consider making these other four movements of money instead – sometimes they’re more beneficial than refinancing.

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If you have a lot of high-yield debt, it may be better to use the money you would have spent refinancing closing costs to pay back those loans first. That’s because refinancing – and cutting your interest rate by a small amount – may not offer as much financial benefit as paying off debts that amass a fortune in interest.

You can always consider refinancing later after these debts are paid off and you may even qualify for a better refinance rate in the future once the debt is no longer in your credit score.

If your goal is to pay off your home loan as soon as possible, you may find that paying extra on your mortgage is a better approach than refinancing.

And if you can make heavy back payments, you may be able to pay off your loan so quickly that refinancing doesn’t make sense. Why? Because with a refinancing, it would take some time for the monthly savings from the new loan to cover the upfront costs of the refinancing.

If you want to reduce your monthly mortgage bill, filing your property taxes can be a good way to go.

You see, a lot of people use a process called escrow to pay their property taxes. Essentially, this means that your mortgage lender will collect a reasonable amount each month to cover your annual property tax bill and keep that money in an escrow account until the bill is due each year.

When your property taxes are paid in escrow and If you can lower the amount you owe, the resulting lower mortgage payment can leave more money in your pocket. And even if you don’t file your property tax payments, reducing your tax amount would lower your housing costs.

In some cases, property taxes can be lowered by challenging the appraised value of your home. If you can get your city to recognize that your home is worth less than it thinks, you can lower the taxes you pay. For this strategy to work, you need either a valuer who proves your home is not worth as much as your city says or a record of comparable new property sales.

Another benefit is that you are in the process in most cases, free or at the cost of a professional valuation.

Many homeowners pay out personal mortgage insurance (PMI) to protect lenders. You may have to pay PMI if you have paid less than a 20% deposit on your home. But let’s say you’ve now paid back your loan – or your home has increased in value – and you owe no more than 80% of the current value of your home. If so, you may be able to remove PMI.

Your lender will remove PMI automatically, but not until you have repaid your loan to 78% of its original value. If your property has risen in value, you may not have to wait that long to remove it and start saving.

Now you can choose to do one or more of these four steps in addition to refinancing. But make sure you do the math to see if your total cost of borrowing will be lower over time, given your new payment schedule and the closing costs that you would have to pay. If it doesn’t, then refinancing probably doesn’t make sense to you.

Chances are, interest rates won’t stay at a low of several decades for much longer. That’s why it’s important to act today, whether you’re looking to refinance and cut your mortgage payment or are ready to pull the trigger on a new home purchase.

Ascent’s in-house mortgage expert recommends this company to offer a low interest rate find – and in fact he used it himself (twice!) for refinancing. Click here to learn more and see your price. Although this does not influence our opinion on products, we do receive remuneration from partners whose offers appear here. We are always by your side. See The Ascent’s full advertiser disclosure here.

Christy Bieber is a personal finance and legal writer with over a decade of experience. Her work has been featured in major media outlets such as MSN Money, CNBC and USA Today.

We strongly believe in the Golden Rule, which is why editorial opinions are ours only and have not been previously reviewed, approved or endorsed by included advertisers.
The Ascent does not cover all offers on the market. The Ascent editorial content is separate from The Motley Fool’s editorial content and is produced by a different team of analysts.

Many or all of the products here come from our partners. We can earn a commission from offers on this page. This is how we make money. But our editorial integrity ensures that the opinions of our experts are not influenced by compensation. Conditions may apply to the offers listed on this page.

The Ascent is a Motley Fool service that evaluates and reviews critical products for your daily money affairs.

By submitting your email address, you consent to us sending you money tips along with products and services that we think may interest you. You can unsubscribe at any time.
Please read our privacy policy and terms and conditions &.

Keywords:

Mortgage loan,Interest rate,Freddie Mac,Refinancing,Finance,Mortgage loan, Interest rate, Freddie Mac, Refinancing, Finance,,

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