Refinancing can help reduce your monthly income, saving potentially hundreds of dollars a month in the right situation.
So what could you do with this money? There are many ways that you could take advantage of these savings, including a variety of investments, generous giving, and (of course) spending a little on yourself!
How Make the Most of Your Refinance
Purchase a Traditional Rental Property
Rental property can be an incredibly useful investment, bringing a strong monthly income while gaining in total value as time goes by. For many (but certainly not all), rental property is considered the best possible investment.
However, there are challenges. You need to find renters, maintain the property, and collect rent checks. For this reason, many landlords choose to use property-management companies, which can eat into profits.
Despite the challenges, traditional rental properties remain a top choice for investors, and they are one of the best ways to use your refi savings.
Purchase a Short-Term Rental
Another option is a short-term rental property. Think AirBnB and other vacation-rental websites. With short-term leases, the per-day income can be much higher. Plus, you are adding an attractive property to your portfolio that you can use when you desire.
However, there is more work involved in finding guests, maintaining the property, and cleaning between visits. It takes a lot of effort, but small houses in high-traffic areas can bring an exceptional income.
Invest in a Fix-and-Flip
If you are looking for a fast return on your investment, a fix-and-flip may be the right choice. If you’re not familiar, a fix-and-flip is simply a property that you purchase, renovate, and sell as quickly as possible.
They have a lot of upside, but you need to be aware of the potential for over-spending, which could eat away all of your profits. Unexpected and costly surprises can ruin these investments, so it’s especially important that you get a great purchase price on these properties.
The biggest advantage for these properties is the chance to earn a fast return, often within a few months or less if you can renovate quickly and move the property to a seller right away. In just a few short months, your investment could return tens of thousands of dollars in profit.
Diversity Your Investment Portfolio
A diverse portfolio is a happy portfolio, or so conventional investment wisdom says. With a diverse portfolio, spread across various types of investments, you have less risk from declines on a single investment. For example, if you are invested entirely in a single commodity, and the price of that commodity goes down 50%, your entire portfolio goes down 50%. But if that commodity only represents 5% of your portfolio, your complete investment portfolio won’t be reduced as drastically.
You can diversify your portfolio with investments such as stocks, bonds, commodities (many different kinds), foreign stocks, short-term investments, and more.
Pay Off Debts
What could you do with no debt payments? Imagine the capital you could generate if your cars, credit cards, and even your home were paid off? With the savings from a refinance, this is entirely possible.
If you were to save as much as $150 a month from refinancing, that would be $1,800 annually. Put that towards high-interest credit cards and you could create better financial flexibility in the future.
Increase Your Generosity
With extra cash, it’s good to think about building a stable financial foundation for the future. But you may find the most pleasure, the most self satisfaction, from giving. Donating to charities, or helping people directly with gifts, can be extremely rewarding.
In fact, this may be the best option!
How can you be generous with extra savings? There are many options, but you could donate to a charitable cause that aligns with your values. You could give to an organization that helps the homeless, children, animals, struggling mothers, wounded veterans, or police and first responders, just to name a few.
You could also give directly. Perhaps you have a niece or nephew who is just starting college. Money for rent, groceries, or transportation could be extremely useful to this person. These are just a few ways that you could use refi savings for generous giving.
It doesn’t all have to be cold-hard investments. And it doesn’t always have to be about others.
It’s okay to enjoy it!
If you refinance, there’s nothing wrong with taking some or all of that savings and funneling it into something that will make you happy, something that is fun and enjoyable, something you’ve always wanted.
What might that be? Well, it depends on your interests and passions, so it could be just about anything. If you save enough from a refinance, you could funnel those extra savings into the ski boat you’ve always desired. Maybe you’ve always wanted a classic car or a motorcycle; refinancing could help you pay for it. A new television or an entertainment center for you home, new tools for your garage, an elegant painting for the dining room, updated workout equipment; anything you’ve thought about buying, but continued to put off, could be paid for with your refi savings.
Of course, enjoyment doesn’t always come from things, but can come from experiences. The savings from a refinance could be put towards a vacation, allowing you to see sights and cities that you’ve never had a chance to visit. It could be use to pay for classes or lessons that help you improve a skill. Guitar lessons, cooking classes, painting, horse-riding sessions; whatever you want to do, a refinance could help make it a reality.
So remember, while it’s easy to get caught up in investments, and everyone feels better after giving, it’s okay to spend some (or even all) of the money on yourself.
Service and Support for Your Next Mortgage
See how much you can save on a refinance by contacting us today.
We are dedicated to helping you get the best mortgage payment possible, and we’ll make sure you get the right information to make an informed decision on your refi.