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Plan Well, Retire Well

Saving and investing your money

Looking for Cash? Have You Considered Refinancing?

Who couldn't use a little more cash each month! Refinancing your home mortgage might be the solution.

Given today's economy, interest rates on home loans are relatively low. It may make sense for you to refinance your existing home loan. Or, it might not! Like most financial decisions, you need to think about the costs and benefits.

Why do people take the time to refinance home loans? You might be asking yourself, "The loan I have now is working fine ... why should I change it?"

Refinancing a home loan can help people who have different goals. Refinancing can allow people to:

  • get a lower loan interest rate,
  • change from an adjustable rate mortgage (ARM) to a fixed rate mortgage,
  • change from an ARM loan to a different ARM but one with better terms, or
  • change the number of years on a loan.

To decide if refinancing a loan makes financial sense for you, you need to start by asking yourself these questions:

  • What are the initial refinancing loan costs? (It's important to ask about all costs. Costs can vary depending on the lender.)
  • How long do you expect to own this home?
  • When will savings from a lower interest rate loan pay for the refinancing costs?

For example, let's assume refinancing a home loan costs $3,000. In this example, the homeowner will have a mortgage payment of $50 less per month after refinancing. Then we know ($3,000 divided by $50) that it will take 60 months (or 5 years) for the savings to pay for the refinancing costs.

You can use a mortgage calculator, like the one at, to help you calculate whether or not refinancing your home makes sense to you.

For more information about refinancing a home loan, visit the U of I Extension website, Opening Doors to Housing Success.

And, if you do decide that it makes sense to refinance your home mortgage loan, what should you do with that extra cash? Why, invest it for your retirement! What else would I recommend?! For ideas about how to effectively save for retirement, visit the Plan Well, Retire Well website.

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