by Maurie Backman | Sept. 7, 2020
Many or all of the products here are from our partners. We may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Your newfound cash could really go a long way.
Mortgage rates are at historic lows and many homeowners have refinanced their home loans to reap serious savings. If you plan to stay in your current home for at least a couple of years, then refinancing your mortgage could make a lot of sense and save you serious money. The key, however, is to not waste those savings. Here are a few good ways to make the most of that cash.
Get free access to the select products we use to help us conquer our money goals. These fully-vetted picks could be the solution to help increase your credit score, to invest more profitably, to build an emergency fund, and much more.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
A solid emergency fund can protect you in the event you lose your job and need money to pay your bills, or you encounter an unplanned expense, like a home repair you can't cover with your regular paycheck. Your emergency fund should have enough money to cover a minimum of three months' worth of essential living expenses. If your monthly mortgage payments shrink, it pays to stick some of that cash in the bank and build up a stronger safety net.
Your mortgage may not be your only source of debt. If you have a personal loan or credit card balance, the longer you carry it, the more interest you'll pay. But if you're now looking at a lower mortgage payment, you can use your savings to chip away at that debt and knock it out sooner.
Steady contributions to an IRA or 401(k) are a good way to help ensure that you're able to live comfortably as a senior. If you've struggled in the past to find room in your budget to fund a retirement plan, use your newfound mortgage savings to build up more of a nest egg.
Though you can, and should, invest your retirement savings, you're also not supposed to touch that money until you're ready to actually retire (in fact, there are penalties involved if you withdraw from a retirement plan too early). On the other hand, if you invest in a traditional brokerage account, you'll have the option to cash out investments as you please and use your profits sooner. And if a lack of money has been a barrier to investing, you can now use your mortgage savings to start buying stocks. Be careful to invest only money you won't need in the short term as the stock market can go down as well as up.
A lot of people can't finance major home renovations without borrowing money. But now you can pool that extra cash and use it to update your bathroom, put in new kitchen counters, or do whatever it is you want to make your home more comfortable.
Maybe your son will need braces next year, or you've promised your daughter she can start music lessons at some point in 2021. These may not be expenses you're grappling with now, but it certainly wouldn't hurt to sock some money away so they're less overwhelming later on. And your mortgage savings could let you do just that.
A well-functioning car isn't really a luxury; it's more of a necessity, especially if you live someplace without public transportation. If your car has seen better days, set aside your mortgage savings and use that cash as a down payment on a more reliable vehicle.
A lot of people are working from home these days. If you're one of them, but your "office" is really nothing more than a corner of your kitchen counter, then it may be time to spring for some tools that will let you do your job more efficiently. That could mean buying an actual desk and chair, upgrading to a larger monitor that doesn't hurt your eyes, or investing in a pair of noise-canceling headphones.
It's always a good thing to lower your expenses, and refinancing is a great way to slash your mortgage payment overnight. Just be sure to make the most of your savings so you really reap your refinancing rewards.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
The Ascent's in-house mortgages expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn't influence our opinions of products, we do receive compensation from partners whose offers appear here. We're on your side, always. See The Ascent's full advertiser disclosure here.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.