Are you feeling weighed down by monthly credit card and/or loan payments? Do you wish you could put away a little money for yourself instead of paying it all out to creditors each month? Are there home renovations you want to complete or a trip you have been putting off taking? These are all reasons why home owners will get a mortgage refinance. A mortgage refinance allows you to withdraw the difference between what your home is worth and what you owe against it (also called equity). Borrowing against the equity in your home, allows you to save money by consolidating bills or starting a savings program. It permits you to accomplish anything else that is important to you, but you have not been able to get done because of a lack of cash flow. Credit card interest rates can be as high as 29% and people today are carrying higher and higher balances on them. The high interest rate means that most of the monthly payment is just going to paying the interest and very little is helping to pay down the principal. The result is that it is very hard to get these balances paid off. You feel like you are running on a treadmill. Combine this with the fact that the average borrower has 3 credit cards in their wallet and you have a recipe for disaster. Each individual credit card wants its own monthly payment from you in additional to your other bill payments, loan payments and mortgage payment. It is no wonder so many people are living paycheck to paycheck and under a great deal of stress. The good news is it doesn’t have to be like this.

If you are a homeowner and your home’s value is more than what you owe on it, you are a prime candidate for a mortgage refinance. A mortgage refinance is the simple process of adding money on to your mortgage up to its present value. Some people will use these proceeds for renovations, or additions to their home; further increasing its value. Others will use the proceeds for a family vacation or new appliances for example. By far the most common purpose is debt consolidation.

The key point here is the equity that has accumulated in your home belongs to you. You paid down the mortgage balance to create it or you made the wise choice to select a property that would appreciate in value over time. It is now your right to benefit from your actions. Make yourself financially better off, by using that equity to improve your situation.

With a little comparative shopping, mortgages can be found for as low as 5% (read my previous article on getting the lowest mortgage rate possible). Compared to 29% on a credit card, this can represent a savings of hundreds or even thousands of dollars. Finally the payments you are making are starting to reduce the principal amount and not just covering interest. Additionally because mortgages have the flexibility to be financed over longer periods of time, the amount of your monthly payment may actually go down, even though the amount you owe has gone up. You will be able to use some of this “new found” money to start a monthly savings plan, and put a little away for yourself each month. Getting a bank statement each month that shows a balance that is steadily increasing is a wonderful feeling, and a mortgage refinance can make it possible. By combining all of your outstanding debt into one mortgage loan you will be adding a great degree of simplicity to your life and the stress of juggling multiple monthly payments will disappear.

You don’t need to feel guilty or apprehensive about adding on to the amount you owe against your home, because, you are not borrowing new money, you are repositioning money that you already owe. You are just managing what the borrowed amount costs you. That is sound financial planning! With the credit cards paid off you will be able to use them the way they were intended to be used. For emergencies and ordering items such as plane tickets and online purchases.

As shown above, a mortgage refinance can bring with it a multitude of rewards and possibilities. When you have decided that you are ready to take advantage of this strategy, check out my follow up article on how to initiate the process and keep fees and costs to a minimum.

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