How to save through refinancing
Aug 6, 2020, 5:49 PM | Updated: Aug 10, 2020, 1:20 am
With rising unemployment rates and a falling economy, it’s no surprise that many families feel financially strapped. As the COVID-19 pandemic continues to bring bad news, there may be a silver lining for homeowners.
The Federal Reserve has slashed interest rates in an attempt to stay ahead of economic disruptions, which means it’s a great time to refinance a mortgage. Refinancing simply means replacing your mortgage with a new one that has a different interest rate, payoff date, or amount. A lower interest rate can mean your monthly payment will go down.
Of course, saving money on a payment won’t help your finances if you don’t use it to benefit your budget. To help, here are some ways you can save through refinancing.
Review your budget
When you refinance, look at your overall budget. Even if your finances are in a state of flux, you can see trends.
Note where you spend a lot of money or small purchases that add up over time. Then figure out what changes you can make, so your money can go further — hopefully into savings.
Resolve to save
After you’ve refinanced, your monthly payment may be lower, and you can put more into savings. Start by updating your direct deposit to automatically divert money into a savings account.
If you feel comfortable with leaving the money alone, consider opening a high interest savings account or a certificate of deposit, so your money can grow faster!
Set new goals
After you’ve paid yourself and your bills, dedicate any other money to debt payments. When you refinance, you could even choose to shorten the life of your loan and make higher monthly payments.
For help as you set new financial goals, use these educational tools from Arizona Central Credit Union:
- Personal finance management software that categorizes expenses to show your spending and sends alerts about unusual charges
- Free seminars on budgeting, debt management, identity theft prevention, building credit, how to buy and sell a car, home buying, retirement, and more
- Materials on budgeting, retirement planning, and other financial topics you can pick up at local branches
- Articles about protecting your money, debt, and other topics
- Resources designed for children and teens
Stay on track
Chipping away at debt is a long-term goal, so avoid splurging or slipping into old spending habits. It’s OK to indulge once in a while, but keep yourself accountable by, for example, giving yourself small rewards for reaching mini goals or teaming up with someone else paying off debt to encourage each other.
Check your budget regularly to ensure your goals are still feasible. Adjust as needed while staying on track.
Invest in your home
An excellent way to use extra money in your budget after refinancing is to put it back into your home. Paying extra toward the principal on your mortgage benefits your future, both by increasing the amount of home you own and shortening how long you’ll have to make a mortgage payment.
Whether you refinance to lower your monthly payment or to shorten the life of your loan, you’ll spend less on interest and more on the things you care about.
Visit Arizona Central Credit Union for more information about how you can take advantage of historically low interest rates and to apply online.