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San Diego downtown real estate broker

Bob Schwartz, CRS, GRI 

Certified Residential Specialist



San Diego, California 92101

Telephone - Cell:
(619) 300-8819

(619) 229-0048

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Benefits of Re-Financing

By Bob Schwartz, CRS, GRI 2005 All rights reserved.

There are a number of benefits which may be associated with re-financing a home. While there are some instances where re-financing is not the right decision, there are a host of benefits which can be won from re-financing under favorable conditions. Some of these advantages include lower monthly payments, debt consolidation, and the ability to use the existing equity in the home. Homeowners who are thinking about re-financing should look at each of these options measured up with their current financial situation to determine whether or not they should re-finance their home.

Cut Monthly Payments

For many homeowners the possibility of lower monthly payments is a very appealing benefit of re-financing. Many homeowners live paycheck to paycheck and for these homeowners finding an opportunity to increase their savings can be a monumental feat. Homeowners who are able to negotiate lower interest rates when they re-finance their home will likely see the benefit of lower monthly mortgage payments resulting from the decision to re-finance.

Each month homeowners submit a mortgage payment. This payment is generally used to repay a part of the interest and of the principle on the loan. Homeowners who are allowed to refinance their loan at a lower interest rate may see a decrease in the amount they are paying in both interest and principle. This may be caused by the decreased interest rate as well as the lower remaining balance. When a home is re-financed, a second mortgage is taken out to repay the first mortgage. If the existing mortgage was already a few years old, it is likely the homeowner already had some equity and had paid off some of the previous principle balance. This allows the homeowner to take out a smaller mortgage when they re-finance their home because they are repaying a smaller debt than the original purchase price of the home.

Debt Consolidation

Some homeowners begin to investigate re-financing for the purpose of debt consolidation. This is especially true for homeowners who have high interest debts such as credit card debts. A debt consolidation loan enables the homeowner to use the existing equity in their home as collateral to secure a low interest loan which is large enough to repay the existing balance on the home as well as a number of other debts such as credit card debt, car loans, student loans or any other debts the homeowner may have.

When re-financing is done for the purpose of debt consolidation there is not always a total increase in savings. Those who are seeking to consolidate their debts are often having difficulties with their monthly payments and are seeking an option which makes it easier for the homeowner to manage their monthly bills.

In addition, debt consolidation can also make simpler the process of paying monthly bills. Homeowners who are nervous about taking part in monthly bill pay programs may be overwhelmed by the amount of bills they have to pay each month. Even if the cost of these bills is not a problem just the act of writing numerous checks each month and ensuring they are sent, on time, to the correct location can be overwhelming. For this reason, many homeowners often re-finance their mortgage to lessen the amount of payments they are making each month.

Using the Existing Equity in the Home

Another prevalent reason for re-financing is to use the existing equity in the home. Homeowners who have a worthwhile amount of equity in their home may find they are able to cash out some of this equity for other purposes. This may include making modifications to the home, starting a business, taking a dream vacation, or pursuing a higher degree of education. The homeowner is not limited in how they can use the equity in their home and may re-finance a home equity line of credit which can be used for any purpose you can think of. A home equity line of credit is different from a loan because the funds are not disbursed all at once. Rather, the funds are made available to the homeowner and the homeowner can take out these finds at anytime during the draw period.



Bob Schwartz, is a Certified Residential Specialist, CA licensed real estate broker with Bob has over 27 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers. You can contact Bob via e-mail at or visit his highly popular San Diego real estate website at:
This work is protected under copyright and may not be published in other works without express written permission from Promotions Unlimited or the following procedures are implemented: Please feel free to publish this article (as long as no changes are made (all hyper-links to remain and not be modified in any way) and the author's name and site URL's are retained) in your ezine, newsletter, offline publication or website. A copy would be appreciated at Click here to email Bob


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