Jason and Lisa had purchased their home5years earlier for $500,000and had taken out a mortgage for $400,000at
Question:
Jason and Lisa had purchased their home 5 years earlier for $500,000 and had taken out a mortgage for $400,000 at the then prevailing interest rate of 3%. Over the 5 years the value of their house has gone up to $800,000 and their remaining mortgage balance is $$350,000. However, during this period they have accumulated debts because of home renovations, taking vacations every year and purchase of a new car financed at 8%. Their credit card debt is now $60,000 on which they are paying an average interest of 18%.
Current mortgage rates are 4% and their financial adviser have advised them to refinance their mortgage to $500,000. What are some of the major benefits of refinancing a home mortgage?
They will have a single payment after having paid all their debts. So much better cash flow.
They will pay lower interest on the total debts they owe.
They can take extra funds and use those for emergency reserve for future needs so that they don't take high interest rate debt again.
All of the above are the benefits of mortgage refinancing
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman