Many homeowners are refinancing their home loan for a lower mortgage rate and as a result many are finding that the equity built up in their home is giving them money back. Obviously, not every homeowner is going to receive money back from refinancing, but those that are lucky enough to do so are often left with a variety of options as to what they should do with the cash.
Many people refinance their mortgage to pay off debt. This is a common practice, but even so, there are better ways to pay off debt than refinancing your home. However, many people believe that by refinancing to a lower rate, which often brings a lower mortgage payment, and getting money back is a safe practice.
Yet, as we have seen with homeowners that are looking for home loan modifications, a second lien on your home can cause trouble down the road. A better use of money given back as a result of refinancing is to apply that money toward the principal on your mortgage.
Paying down your mortgage principal is going to benefit you in the loan run and help you get out of debt faster. If you are looking into refinancing your home loan you may want to see if you can get money back, and if so, you may want to pay that money toward your principal. While refinancing may not be in every homeowner’s best interest, those who are able to safely do so, and pay on their principal without incurring any fees from your lender, may want to consider it a viable option.