Refinancing Help To Save Thousands To Invest

Refinancing Help To Save Thousands To Invest

Senior Loan Officer
Brian Decker
Published on October 19, 2021

Refinancing Help To Save Thousands To Invest

If a person is in $30,000 of credit card debt, they will spend an average of $100,000 paying off that debt. Can you think of anything you would rather do with an extra $70,000?

Take a vacation? Advance your education? Upgrade your lifestyle? Invest for your future?

If you're a homeowner, a cash-out refinance could save you up to $70,000 in useless interest payments by consolidating your debt into the lowest-interest loans on the market.

I was actually worse off than this scenario. My first business failed miserably and I was left with $40,000 in credit card debt at interest rates of over 20%.The math of this debt makes it nearly impossible to climb out from under.

The only thing that saved me was the fact that I was a homeowner, and my home had appreciated in value. With a cash-out refi, I was able not only to erase that high-interest credit card debt, but make enough extra payments to become completely debt free in only three years.

Here's how you can do the same thing …

Step 1: Tally Up Your Debt

Be brutal. Note every debt. Most Americans have many debts to consider - consumer debt, student debt, medical debt, much of it at high interest rates.

For simplicity's sake, let's say you have only three outstanding debts:

Monthly Payment
Credit Card
Consolidation Loan 

Step 2: Determine Your Refi Borrowing Power

You know how much you paid for your home, but how much is it worth now? You can check your home's value on sites like or Redfin, but remember these are marketing sites and tend to inflate the prices to rope in customers. Feel free to email me and my team with your address and we'll give you an honest assessment of your home's current market value.

Suppose you determine with reasonable confidence that your house would sell on today's open market for $600,000. Thank you, inflation! Thank you, supply and demand! With a $350,000 outstanding loan, you probably only paid about $400,000 for that house. You have a sizable amount of wealth tied up in home equity.

So how much can you borrow against that value? The rule of thumb is 80% for a conventional or FHA loan. With VA loans it may be up to 100%, but let's assume you have a conventional mortgage like most of us do.

80% x 600,000 = $480,000

You can borrow up to $480,000 against your home! You don't have to borrow that much, but it's nice to know that upper limit.

Step 3: Refinance and Save

Let's say you decide to borrow $405,000 - enough to pay off all three of your loans, preserve some of your equity, and pull out a nice $20,000 nest egg to invest elsewhere.

You now have one debt instead of three. The balance is $20,000 higher than the initial aggregated balance … How much is the monthly payment?

Because home loans have the lowest interest rates and longest amortization periods, your monthly payment actually goes down. If your interest rate stays the same, another $55,000 on top of your home loan will actually increase your monthly payment by only $250 or so.

Instead of a $3,300 monthly debt service burden, you have one monthly payment of only $2,250. That's more than an extra $1,000 a month.Want to be completely debt free? Apply some or all of that monthly surplus to pay down the refinanced loan quickly. You could pay off the loan in a few short years.

Ready to stop throwing away money on high-interest debt?

The longer you wait, the more money you sink on interest. Reach out to me and my team today for a Personal Mortgage Review. We walk you through the above three steps to determine how much money you can save on interest rates and invest in your future, thanks to the magic of a cash-out refi.

Senior Loan Officer
Brian Decker Senior Loan Officer
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