With interest rates still low, it remains a good time to refinance your home. But rather than go to all the work of refinancing and then blow the money on indulgences, here are 5 smart ways to make even more money from your cash out refinance.
Get Rid of Debt. Paying off higher interest rate debt doesn't sound like it's a money-maker on the surface. But you'll free up your monthly budget and feel like you have more money. And you save whatever the amount of interest you've been paying. That's a return on your money of 5%, 10%, or even more based on your rates.
Add to or Start a Portfolio. You can turn the money you've saved on a cash out refinance into an investment that earns money each quarter. For stock market novices, there are many simple options for investing, including target date funds, automatic balancing, and exchange-traded funds (ETF). With an average return of 10% over the long term, this is a good place to build your money.
Fix the House. If you ever plan to sell your home, investing money into its maintenance and upgrades is smart when you have the resources. Start with any maintenance that could put the home in danger, such as new roofing or siding and updating wiring or plumbing. Then, choose upgrades that have a good return on investment, such as adding bathrooms, updating the kitchen, and adding bedrooms.
Go to School. Use your money to invest in yourself with additional education. Whether you'd like to finish schooling you began, add a few skills, or complete a mid-life career change, this is a smart way to pay for such an endeavor. Not only will you save the money you'd pay on interest for student loans, but you also build your earning power for years to come.
Buy a Rental. Investment property is a great way to build income for the long haul. But it's not always a smart move if you have to push your budget too hard to buy and keep it. The sudden influx of funds from your cash out refinance can make things much more workable. Be sure to build a plan in advance for things like renovations, taxes and insurance, and covering months when there are no tenants.
Which of these money-making uses is right for your refinance? Whatever you choose, you're sure to be glad you took this opportunity to boost your income and make your financial life more stable. When you are ready, talk to a cash out refinancing service about your options.Share