Refinance and Invest your Proceeds

Posted by  on Apr 16, 2009
Refinancing refers to applying for a secured loan intended to replace an existing loan secured by the same assets. Refinancing can be very useful in managing mortgage loans due to varying interest rates. If a better interest rate becomes available, it may be a wise decision to refinance under new and better terms.

Refinancing may be undertaken to reduce interest costs, to pay off other debts, or to reduce payment. Refinancing may also allow a borrower to change from a variable-rate to a fixed-rate loan. By refinancing an adjustable-rate mortgage or so-called "Balloon" mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time. A borrower may also wish to liquidate any equity that may have accumulated during the borrower’s ownership of the property.

Refinancing intelligently will provide a customer with a lot of extra income. Make that income work for you and invest in more property. Real estate is a tangible, cash-generating asset, much like gold or silver, and appreciates in values just like these precious metals. Being a tangible asset, however, it does not function like a bond or stock that can quickly lose value; it remains an excellent, long-term way to invest.

Purchasing real estate is a good way to invest your money and provide yourself some increased financial security. It's a good way to increase cash flow and offers many profitable investment options. But, if you're new to real estate investing, you may ask, "What is real estate investing all about? What are the benefits to me and how can I get started?"

People who refinance and invest the proceeds in real estate will benefit from financial leverage, using a mortgage to build wealth in a way that other forms of investments do not. Real estate investment has proven to be a powerful method of creating wealth over time and there are three main forms of return-on-investment: cash flow, return on taxes and appreciation.

Cash flow represents the most direct type of return, since it is money you can "put in your pocket" right away. Investing in real estate is a way to increase your cash flow. That, in turn, can provide the working capital you need to further expand your investment opportunities and obtain greater financial security.

Many investors in higher tax brackets are less concerned with cash return and more focused on the tax advantages of real estate investment. A great tax benefit for the new investor is a first-year, 100% tax deduction for up to $100,000 of business equipment purchased. This would include appliances. Then there's also the tax benefits of being able to deduct mortgage insurance as well as points paid on a home loan. Click here to read more about Homeowner Tax Deductions.


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