Use refinance savings to increase the value of your home.

There are many reasons to refinance your mortgage. You may want to consolidate debt into one lump sum. You may want to lower your monthly payments by finding a lower rate. You may find yourself with a little extra cash in your pocket at the end of the month.

When you have a little extra cash lying around, your first instinct may be to spend it. But before you spend, consider reinvesting that money you save into your home. There are a number of ways to make your refinance savings work for you. Continue reading to learn the most effective ways to invest your refinance savings back into your home.


Build Equity

One of the great things about refinancing your home is you may see a drop in your mortgage payment. This drop will come as a result of a lower rate. A lower mortgage rate means more of your monthly payment applies to the principal of your home. More money applied to the principal results in faster reduction of the overall loan.

When you have a little extra cash around each month, consider applying it to the principal of your loan. One or two hundred dollars may not make a huge difference when handling your monthly expenses, but if applied to the principal of your home, it can decrease the overall loan.

Imagine you save $200 a month by refinancing. If you continue to pay $200 towards the principal of your loan, at the end of the year, you will have decreased your loan by an additional $2,400. If you continue these extra payments for 10 years, you will have contributed an additional $24,000 to your loan.

There are two important things to remember when making extra payments to your home. The first thing to remember is always budget the extra payment. This will ensure you have enough money in your bank accounts to cover the extra payment and your other expenses.

The second is to make sure you have an emergency savings of at least 6 months stored. This will protect you in case there is an illness, job loss, or sudden disaster that limits the income of money.


Go Green

Once you have built equity in your home, or paid your mortgage off completely, you may want to consider updating your home. New, energy efficient products installed in your home can save you hundreds or thousands of dollars a year. A few areas you may want to consider when going green include your HVAC system, appliances, and the windows and doors in your home.


Remodel Your HVAC System

Your home’s heating and cooling system is the largest consumer of energy in your home. Consider installing a programmable thermostat. This will allow you to set the temperature in your home while you are away. You may also want to consider getting a professional energy audit. Local energy companies can perform energy audits to see where your home’s energy is least efficient.

Hot and cold air are most often lost in the attic and basement areas. Make sure to insulate your home in these areas and seal them against loss.


Redo Windows and Doors

Part of sealing your home against heat loss is making sure to install energy efficient doors and windows. Manufactures design windows and doors to protect against heat loss or gain by:

  • Using insulating materials in construction
  • Use solar radiation effectively
  • Reduce infiltration of outside air


Replace Your Appliances

The appliances in your home use most of the energy in your home. The largest energy consumer in the home is the refrigerator. Where possible, upgrade to Energy Star rated appliances to decrease your homes energy consumption.

If this is not possible, consider using power strips with timers. These can disconnect power supplied to appliances when you are not at home.


Repair and Remodel

Another way you can invest your refinance savings is to renovate and remodel your home. There are a number of areas in the home that may benefit from a remodel. The most common rooms to remodel include:

  • Bedrooms
  • Kitchen
  • Basement
  • Bathrooms

While it is important to make the inside of your home more appealing, it is also important to not forget your home’s exterior. Add things that increase functionality and are aesthetically pleasing. Trees, shrubberies, benches and pergolas can not only increase a home’s feel, but it can also increase a home’s value.

If you refinance at the right time, you can save yourself thousands of dollars over the course of your mortgage, freeing your finances to allow you to invest in your home. Speak to a local mortgage consultant for more information about the benefits of home refinancing. They can paint an accurate picture of the benefits and advise you on your options.

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  • Annette Murphy

    Clarenville and Conception Bay North area

    Annette has been self-employed in the real estate and retail sectors for many years. From her experiences,...

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