Taking Advantage of Equity
Refinancing Increases Homeowners' Options


There are several reasons why refinancing one's mortgage is a good idea. Refinancing allows homeowners to borrow for less using their equity as a source for cash or as a home-equity line of credit. Homeowners can borrow against their equity instead of selling stock, which gives them flexibility in investing.

Refinancing also allows one to combine a few debts into one mortgage with decreased payments, which drastically cuts monthly expenses. Paying off a mortgage early saves a serious amount of money in interest payments -- one extra payment per year on a $200,000 mortgage, paying at a rate of 7.5 percent, can save almost $76,000 in interest, as well as cut the life of the loan from 30 to 23 years.

Mortgage payment should never be sped up without first taking care of retirement savings. Extra payments could possibly put too much of a burden on a household budget, setting the stage for more borrowing in the future. By eliminating a mortgage, homeowners should keep in mind that they would be paying a larger chunk of their income in taxes because of the decrease in debt.

"Refinancing Your Mortgage Could Be A Good Move," USA Today (05/04/01) P. 3B; Fogarty, Thomas A.

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© 2002 Don Marland