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Refinancing Today Could Mean Smooth Sailing For You In The Long Run

Updated on June 2, 2009

There has been a lot of discussion about the historically low Philadelphia mortgage rates and the fact that right now is a great time to refinance your home mortgage, if at all possible. And when you stop to consider all the effort that is going into creating new programs for struggling home owners, it would be worth talking to your mortgage lender even if you think you might not be in a position for a Philadelphia refinance right now. You never know, you might be pleasantly surprised.

Once you've established that you can do a Philadelphia refinance, and that it makes sense for you to do so right now, the next question will be; what to do with the savings you'll be getting. While that might sound ridiculous, if you don't make a plan for what to do with that extra cash, it will just 'disappear' into your day to day expenses and will never have the kind of impact on your life that it could.

A couple of different suggestions as to how you might apply that money to your 'big picture' were made in previous articles. In each example we used the hypothetical number of $175 in monthly savings from your new, lower rate Philadelphia home loan. While that amount of savings is pretty good, it's probably not enough to make many people overly excited. However, with a bit of disciplined effort applied to that money, we showed how it could turn into something that you can excited about.

In our first example applied the money to pay off existing credit card debts. For our example we used two cards with interest rates of 12% and 16% carrying balances of $4000 and $8000 respectively. We showed how you could apply the new savings to the minimum payments each month and shorten the pay back period from 23 years to just over 4 years.

In the next example we illustrated how you could pay off your Philadelphia mortgage faster by applying the extra money to the principle each month. Our example was of a loan amount of $225,000 at 5% fixed. By applying our extra cash to the principle each month, we reduced the time to pay off the mortgage by over 7 years. What does that add up to for you? Over $58,000 in savings.

The last option we will talk about is putting that money to work by investing it. The investment goals could be anything from your retirement to a vacation to a child or grand child's college expenses. The reason is totally up to you, we just want to show you what you might be able to accomplish with this 'modest' monthly contribution.

We'll need to use some 'guesstimates' in this calculation, but we'll use conservative numbers to be on the safe side.

Let's say that for the next 18 years you're going to add $175 to an account that already has $2000 in it (planning for a new child's college expenses). We're going to use a conservative annual rate of return of 7% for this example.

So what does baby have waiting when they turn 18? A bit over $83,000! Not a bad start for college.

Now let's look at a different person; a 30 year old who has plans to retire when they turn 65. We'll also say that while the $175 gets added to it every month for the next 35 years, it started with a balance of $0. By the time you turn 65, if you had done nothing else for your retirement, this account alone would have over $300,000 in it. Again, not too bad.

You need to remember of course that these figures are all hypothetical. If these numbers have got you thinking though, you really owe it to yourself to discuss it in more detail with a Philadelphia mortgage lender as well as an accountant and/or a financial planner.

The main take-away here is that while savings may seem like 'small change' at first, if you can be disciplined enough to apply those savings to a PLAN, you can have a major impact on your overall financial picture. Your Philadelphia home mortgage is more than a bill; it should be part of your overall financial plan.


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