Leverage your Mortgage and Improve your Finances

 In Refinancing your Mortgage

If you own a house in the Denver area, you probably have some equity built up in that house.  House values have gone up for years and they continue to go up, with no end in sight.  You can leverage your mortgage and improve your financial picture.

As a homeowner, you are making money, but if you aren’t leveraging your mortgage to improve your personal financial situation, you could be making a serious blunder.  Here are just two examples of how you can use the equity in your house to make your financial life better.

Get Rid of Other High-Cost Debt

Most Americans have credit card debt.  Some of us have a lot of it. The average interest rate on those credit cards is about 17%.  If you owe $15,000 on your credit cards, you are paying $2,550 per year at 17%. That’s more than $200 per month going towards the interest, without paying any of the principal off.  

Here’s how to get rid of that high payment.

If you get a cash-out refinance, you can take up to 80% of the value of your house and use it for anything you would like.  In this case, let’s say you decide to pay off those credit cards. If you add that debt to your mortgage, you will probably be lowering your interest rate by about 13%.  That’s a savings of $1,950 per year, and that’s just the interest. You also won’t have the principal to pay on your credit cards, so you will probably end up paying many hundreds of dollars less each month.  

What could you do with that money?  Pay down the principal balance on your mortgage, save for retirement, pay for home improvements, pay for college… really, the list is endless.  It’s your money and you can do anything you’d like with it.  

Here’s another example of how you can leverage the equity you have in your house.

Use your Equity for the Down Payment on a Second Home or a Rental Property

Many of us want to own a second home or a rental property, but we don’t have the money for the down payment.  An easy way to get that down payment money is to refinance your current mortgage and take out the cash needed for the down payment.  Sure, you will be paying interest on the money you added to your mortgage, but it won’t be a lot because interest rates are so low right now.  

Here’s how buying a second home or a rental property can grow your wealth.

Let’s say your current house is worth $450,000 and let’s assume the value of your house is going up by 3% per year.  That’s $13,500 the first year, $13,905 the second year, $14,332 the third year, etc.  

Now, let’s say you use some of the equity in your house for the down payment on a second home or a rental property.  If the second house costs $450,000, you will suddenly be making 3% per year on $900,000 worth of property, instead of making 3% on just $450,000 worth of property.  So instead on making $13,500 the first year, you would be making $27,000. Instead of making $13,905 the second year, you would be making $27,810. Instead of making $14,332 the third year, you would be making $28,664.  It’s easy to see how borrowing the down payment and leveraging the equity in your house makes a lot of sense financially. That’s how people who aren’t wealthy become wealthy, and how people who are already wealthy become wealthier.

Contact us today and let us show you how to leverage the equity you have in your house.  We have helped countless people build their wealth. Let us help you build your wealth.

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